MESSAGE FROM CAM
Chief Investment Officer
The binary market reactions continue with a quarter that contained a horribly negative May, followed by a record positive June. Once again, if you returned from a period of non-connectivity, the overall asset market returns look absolutely healthy and, in fact, quite pleasing.
JUNE 2019 and YEAR-TO-DATE RETURNS
So what’s the problem? To begin to answer this, let’s first take a look at the numbers:
GLOBAL ASSET CLASSES, YEAR TO DATE
SOURCE: DATASTREAM, CAM.
A unique record was achieved during 2018 where no single asset class outperformed cash for the year. Now, with just half of 2019 behind us, we’re experiencing the exact opposite: Every single asset class in the world is outperforming cash, and handsomely too.
Let’s consider what’s changed and what hasn’t:
At Citadel Asset Management, one of the pillars of our investment philosophy is that the future is uncertain and it’s bound to surprise. This is no blanket excuse, but rather a reminder to create solutions that can withstand volatility by including different sources of return within our portfolios. This philosophy and process has served us well during these very uncertain times, which certainly cause exaggerated binary market movements. We keep our eye on the ball by remaining focused on the medium-term underlying fundamentals of the markets and by not getting overwhelmed by short-term “noise” and presidential decrees.
A recent study published by the School of Economics at the University of Cape Town, titled: Analysis of Media 24’s “Economist of the Year” forecasting competition, analysed the accuracy of forecasts done by South African economists since 1998. The authors aimed to show how accurate forecasts can be and by what degree they err when they do. It is a most insightful paper and one of the interesting findings was that the consensus (average) forecast of all the entrants, ended up being the ‘best’ forecaster. Another interesting fact from the paper is that Citadel was the highest ranked institutional participant for overall forecasting performance. This is a testament to the robust process designed and curated by dedicated people, over the past 25 years. It is exactly this macro-economic framework that sets the scene for our entire investment process at Citadel.
I hope you enjoy this edition of the CITATION.
Chief Investment Officer: Citadel Asset Management