Barbadians invested in mutual funds via Fortress Fund Managers’ (FFM) are earning higher returns and the outlook for the rest of the year is positive.
That is the latest investor update from FFM chief executive officer and chief investment officer Peter Arender, who says that with the publication of the next quarterly earnings reports it will be important to “pay very close attention to pressure on profit margins that are coming from tariffs”.
“We’re also going to have to keep an eye on any slowdown in the labour markets and what impact that’s having on company revenues,” he added.
The impact of last week’s interest rate cut by the United States (US) Federal Reserve, and expected future reductions, was another issue to keep an eye on, said Arender.
He was speaking just before the US Fed announced its first interest rate reduction since last year. As the investment expert predicted, the rates have been reduced by 25 basis points to a range of four to 4.5 per cent.
Reporting on the performance of FFM funds up to the middle of September, Arender said: “September has continued to be a pretty good month so far, adding to a pretty good year. Our funds at Fortress are up. The Caribbean Growth Fund is up about 11 per cent year to date, our US dollar World Growth Fund is up 13 per cent.
“And even in the boring bond world, we’re looking at gains of four to five per cent in our bond funds. On the equity side, yes, US stocks are stronger, yes, Caribbean stocks are kind of flat as often they are.”
He shared that “the real secret weapon this year has been things outside the US, so what we call international and emerging market shares”.
“Our emerging markets fund is up about 40 per cent year to date, a lot of cheap stuff in China, Brazil, even places like Greece have rallied a lot this year from what we’d call very, very cheap to now just really cheap,” the FFM boss stated.
“We here are global investors, who invest in the US, Caribbean and all around the world and this year has definitely been a year where it’s paid to be investing outside the US.”
Arender noted that financial markets had already priced in the US interest rate cut, pointing out that “we’ve got two year bonds in the states yielding
3.5 per cent which would suggest that investors are already thinking rates will continue going lower this year and into next year”.
“The question now, though, is, how fast can the Fed cut? What are investor expectations and what happens around the economy as the Fed cuts more? So we’d be in the camp of thinking, yes to the Fed cutting more,” he stated. “However, it’s going to be a rare situation where you’re going to have everything still being pretty good in the economy as the Fed cuts.” He told investors: “don’t be surprised to see a little bit of choppiness, maybe some concern about the economic conditions and we need now, [as] always, to be careful of high expectations. “In the equity market in the US, there probably are some sectors that we’d say embody too high expectations, areas where we haven’t invested for some time and aren’t now. US technology is one of those sectors by and large, or has some expensive stock. “But I think generally, if . . . we think about what’s going on and what the outlook is from here, we’re still very, very positive on global equities. Interest rates are still pretty good, and I think that you’re going to see some pretty good returns coming in through the rest of the year.” He said, however, that monitoring tariff related impacts on corporate earnings was key, as was outcomes in the labour markets. “We’ll also have to see how fast this interest rate cutting regime or programme continues after this first cut. I think also . . .a lot of the market gains in the US especially have been in the hands of some very large leading companies, and their valuations are not cheap.”
Despite this, Arender said the good news was that “being global investors, we’re finding lots of good things to buy still around the world”.
“Nothing moves in a straight line, though, so it wouldn’t be surprising to see a little bit of choppiness over the next little while, but the outlook from where we sit still looks quite good indeed.” (SC)
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