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November 30, 2018

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

Sweating for your interest

A Ukrainian bank has started offering its best interest rates to clients who walk 10,000 steps a day – you can quite literally sweat your assets.  The bank says it is encouraging clients to become richer and healthier at the same time: a worthy goal in a country with record obesity levels. The exercise-linked account will reward customers who manage the steps with a rate of 21% on their savings. Anyone who fails to walk the walk for three days in a row will see their rate slump to 11%. (From The Guardian, 23 November 2018)

Channelling Warren Buffet’s investment style 

Warren Buffet’s investing style, coined ‘Buffettology’, has been shown to be pretty successful if the UK’s Keith Ashworth-Lord is anything to go by. Ashworth-Lord launched the Buffettology Fund in 2011 after being approached and encouraged by the author of a book that explained the investment style of the man known as the “Sage of Omaha”. And the figures talk for themselves: the Buffettology Fund has returned 93% over the past five years. (From The Times, 25 November 2018)

Man and machine 

Asset managers have started to adopt emerging approaches to investing, in this new era defined by automation, algorithms and big data. Analysts have dubbed marrying quantitative and fundamental investing as “quantamental” – with some going as far to say that this will define the future of the asset management industry. AI can even be used to scan earnings calls and investment decisions to help humans make smarter decisions. (From Financial Times, 20 November 2018)

 

Blockchain transforming real estate investment

US investors can now acquire a piece of real estate in the form of blockchain tokens, with the launch of the first tokenised Real Estate Investment Trust (REIT) in the US this week. Some are hailing this as the next big development in property transactions – possibly as big as the shift from snail mail to email. (From Fortune, 27 November 2018)

Cryptocurrency reviews for sale

An investigation this week found that positive sentiment towards cryptocurrencies is routinely bought, with the fake reviews putting investors at risk. The investigation found that rating “experts” will essentially grade any cryptocurrency positively for a price. This is according to more than two dozen people in the cryptocurrency market and documents reviewed by reporters – but has this only scratched the surface of the issue? (From Reuters, 27 November 2018)

Is the Santa Rally coming to town?

In the last three decades, 26 of 30 Decembers have achieved positive returns from the FTSE 100 – but is the so-called Santa Rally a real thing and can it be relied upon each year to deliver some much needed (pre) Christmas cheer?

Many analysts agree the mythical December bull run is a real thing. And it happens all around the world in all manner of markets. In fact, if you only invested in Decembers since 1986, you’d be enjoying growth of around 84%. Quite the tidy stocking filler.

The big question is why is December such a great month for markets? We all associate the latter half of the month with office parties, well-deserved breaks and lots of ‘out of office’ replies. Analysts can’t be certain why there’s an upswing, but there are several pervasive theories.

The first is simply seasonal goodwill. Some theorise that market movers are in a jollier mood this time of year and are inclined to buy rather than sell. Another idea is that the market rises on lower volumes of trades as professional investors take a holiday from the markets, allowing retail investors to make hay.

There is also evidence to suggest that the Santa Rally is down to fund managers rebalancing their portfolios at the end of the year to ensure they hit the ground running in the first weeks of January. It may also be that Christmas bonuses are eagerly cashed in and invested. Finally, the rally might be down to bargain hunters looking for a good deal before the advent of the January Effect, where stocks rally as money is allocated for the New Year.

Ultimately, the Santa Rally might also just be a self-fulfilling prophecy. In the true spirit of the season, if we all believe in it, it might just come true – i.e. if enough people invest to take advantage of the festive boom, the festive boom happens.

The Santa Rally has been one of the few reliable stock market phenomena of the last few decades, reliably turning up on its sleigh during the 80’s downturns, the dot.com bust and much of the worst of the prolonged financial crisis. That said, we face unprecedented turbulence at every turn this year, and we enter December after stark warnings of financial malaise approaching Brexit.

We all just have to ho-ho-hope that we have been good enough this year to receive a much-needed Santa Rally…


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