Cambridge Weekly Update – 13th January 2020

So far so good

Compared to last week’s ‘brink-of-war’ geopolitical shock start to the year over the US-Iran tensions, this week has brought relatively positive economic news, with not much to upset global markets, even if the general news flow was tragic from a humanitarian and environmental perspective. At the moment, no new bad news is good news in investments, with constant talk of “liquidity” (for institutional investors) and “dry-powder” (for private equity groups). Whether investors’ money is wet or dry, does not matter. The US’s NASDAQ tech stock index is above 9,000 for the first time, as we write.

Stock markets took it decidedly positively that Iran put more effort behind domestic propaganda than actual hostilities against the US and its allies. This allowed a return of the quiet with which the year originally started, even though many political observers warn that this may not be the end of the affair.

Asset class returns for December 2019, 2019 and the full decade

It has been the end of the month, the year and the decade and so we decided to run a slightly more comprehensive monthly asset class returns overview table than we usually do. However, whilst the last decade brought above average returns, that provides no indication of what will happen over the coming 10 years. Stock market returns will be driven by general economic development, which will likely be bumpy from time to time, but there are reasons to believe that our environmental challenges as well as technological opportunities create catalysts for growth that were absent in the last decade.

Emerging trends from the 2020 Consumer Electronics Show (CES)

The start of a new year, and even new decade, means it is time for 4,500 of the world’s biggest and smallest companies in the technology space to come together in Las Vegas for the Consumer Electronics Show (CES) and unveil their latest gadgets and gizmos.
Nearly 200,000 enthusiasts and entrepreneurs attended this year’s exhibition, getting “hands-on” with the tech being released later in 2020, and testing “stuff” arriving in the coming decade. There is always a lot of tat – a web-connected toilet paper dispenser anyone? – and software in “development” that will never see the light of day.

Emerging markets – a re-introduction

The Economist dates the term “emerging markets” back to 1981, invented by fund manager, Antoine van Agtmael. Struggling to launch a “Third-World Equity Fund” he “At last .. came up with a term that sounded more positive and invigorating: emerging markets. ‘Third world’ suggested stagnation; ‘emerging markets’ suggested progress, uplift and dynamism.”
Now established, “Emerging Markets” (EM) is something of a catch-all term. Most diversified investment portfolios have a certain amount of capital allocated to EM assets as opposed to “Developed Markets” (DM).

Read the full Commentary here