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End of year rally in sight? Who knows…

2018 has been, putting it lightly, a challenging year, not only for investors but also for asset managers, analysts and market participants. Some would call it a rollercoaster ride. In all fairness, there were times whereby I too would have been of the same opinion, as we did witness few albeit timid bouts of recoveries throughout the year.

But, anyone who has been on a roller coaster ride is well aware that the thrills and adrenaline rush are achieved through sharp twists and turns in varying directions and speeds, at times sharp downfalls followed by gradual moments where the rollercoaster heads upwards, only to repeat this process, and eventually end off at, more or less, the same starting point. Actually better off, as the thrill of the ride is priceless and difficult to quantify.

With tomorrow being the last trading session of October, the 10th month of the year, I am struggling to describe 2018 as a roller coaster ride, as the market downturns by far outweighed any short-lived upswings we had, and, we are nowhere close to where we began. To top it all off, nothing was thrilling, be it for the bond investor (both investment grade and high yield) as well as those exposed to equities.

Yields on investment grade sovereigns across both sides of the Atlantic rose this year, so even the risk averse investor has practically nothing to show for. On the flipside, in nine months alone, from the initial trading sessions of February 2018 till the time of writing, the US dollar strengthened by over 9 per cent against the euro, so those European investors exposed to US dollar assets benefited from the strengthening, but this dollar strength was merely a reversion of the weaker dollar registered in the latter half of 2017.

If you are hoping for some form of good news, or market positivity to turn around investor sentiment and feel that time is running out and that hope is slowly fading, then you are not alone. It has not been an easy year. Anything but. I could easily say that it has been one of the most challenging I have witnessed since the 2008 Lehman crisis.

Not that the corrections registered this year were any close to what happened 10 years ago, but the uncertainty caused by external factors in what could be described to be a healthy global economy (the US is moving from strength to strength, the eurozone is timidly improving while EM economies remain robust) has shaped 2018. Trade wars, Brexit talk, uncertainty emanating from Italy and Argentina continue to linger on. It has gotten to the point where for the investor, it has become way too heavy and has been weighing on them for so long that time and patience is getting the better of them, causing the rollercoaster ride to finish (or so it seems so far) in a completely different location than where it started.

But hey – not all is doom and gloom. True, valuations and market sentiment took a beating this year, one we had not been accustomed to seeing. Opportunities will arise, as we saw during Monday's trading session. Running out of patience is easy: good things happen to those who wait.

Disclaimer:

This article was issued by Mark Vella, investment manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.

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