Elkstone Investment Services Monthly Bulletin

Investment Services June 2019


Paul Gorman, Portfolio Manager


Global equity markets have continued the strong start to 2019 but still display signs of nervousness.

Paul Gorman is Chief Investment Officer at Elkstone Private


The Market – Latest Dynamics 

During May equity markets weakened as bond yields fell significantly on their different interpretation of the prospects for slower economic growth and potentially lower interest rates. The ongoing uncertainty and potential escalation of global trade tensions contributed to volatility. Generally, markets stabilized in June following supportive comments from Central Banks that validated the markets expectations of lower interest rates later this year and into 2020. Over the month of June the S&P 500 rose over 6% completely regaining the ground lost in May. In June the Eurostoxx 50 gained over 5% almost reversing the 6.5% loss in May.

The Japanese market didn’t recover as strongly and over the month the Topix Index was +2.5%. The interest rates reductions now expected and discounted by the markets saw the USD weaken almost 2% in June versus the EUR. Over recent months political events have remained to the fore and during May markets navigated the European parliamentary elections, ongoing Italian budgetary tensions and the unresolved Brexit drama in the UK. The G20 summit in Osaka at the end of June will be watched closely for any developments on trade issues.


Market Performance Returns – EUR (€) Denominated


Name Year to Date
Trailing 30D
May Return FY 2018
EUR (€) EUR (€) EUR (€) EUR (€)
Elkstone Global Equity Strategy +18.50% +2.15% (4.54%) +1.16%
db x-trackers MSCI AC World ETF +16.56% +2.07% (4.96%) (6.20%)
U.S. – S&P 500 +17.56% +2.03% (6.12%) (6.24%)
Europe – Eurostoxx 600 +13.20% +1.46% (5.70%) (13.24%)
Gold +10.87% +7% +2.13% +3.11%
WTI Crude Oil +31.86% (2.56%) (15.88%) (24.84%)
Source: Bloomberg, 27th June 2019


Elkstone Global Equity Strategy

During June the Strategy gained +3.4% compared to a representative global equity index +3.9%. YTD the Strategy is +18.5% and is +2.2% ahead of a global equity index of 16.3%. Following the weakness in May the risk-on rotation in the market saw a continuation of the YTD pattern with an outperformance of cyclical sectors (Materials, Technology, Industrials, Consumer Discretionary) relative to defensive sectors (Real Estate, Utilities, Consumer Staples). Within the Strategy the strongest performance was recorded in the Healthcare, Consumer Discretionary and Utilities sectors.


Elkstone Observations

Ahead of the upcoming reporting period we can reflect on the Q1 reporting season. It concluded with an aggregate picture of stability with zero sequential earnings growth vs Q4 2018 compared to expectations of a decline. Following the recovery in June, the US equity market remains +16 % YTD with expectations for earnings growth for FY 2019 +3% and FY 2020 +11% both substantially lower than the >20% rate seen in 2018. The ensuing valuation multiple expansion may now become a headwind to further progress

The re-calibration in interest rate expectations since May has been very significant. Official US interest rate policy (Yellow Line) has been stable since the last Fed hike in Dec 18. With inflationary pressures not visible and growing fears about (trade related) slower economic growth money-markets have moved decisively to price in an easing of interest rates (White Line) with almost 100 bp of rate reductions now expected by Jan 2020. This has been fully reflected in the bond market with 2 year Treasury yields (Green Line) falling in lock-step to their current level of 1.75%


Source: Bloomberg

Notable movers – Trailing 30 Days – EUR (€) Denominated Returns
Positive Performers
Positive Performers Trailing 30D (T1M)
EUR (€)
Sotheby’s +54.08%
Tableau Software +43.49%
Barnes & Noble +39.90%
Deere & Co. +16.94%
Ashtead Group +13.30%
Negative Performers
Negative Performers Trailing 30D (T1M)
EUR (€)
Natixis (26.51%)
GAP inc (18.60%)
PVH Corp (14.03%)
Twitter* (8.43%)
Glanbia (7.69%)
Source: Bloomberg, 27h June 2019


This monthly marketing report should in no way be relied upon or substituted for the exercise of independent judgement. Elkstone has taken all reasonable care in the production of this material, but nothing in this note should constitute investment advice in any shape or form. Nor should it be perceived as giving accounting, tax or legal advice. This report is produced solely for educational purposes only. Individual circumstances differ, and readers should not act upon this content in any way. Readers should consult with their independent and regulated professional advisors before making any financial decisions. Prices can fall as well as rise, and may be subject to sudden and sharp moves. If you invest in the stock or other markets you may not recover the total amount originally invested. Historic performance in no way guarantees or indicates future price performance. Further risks to be aware of include currency and exchange rate fluctuations, which may also adversely impact your holdings. The educational information and opinions presented in this report were obtained or derived from sources that Elkstone deems to be reliable, but Elkstone or its related parties (employees, consultants, management, and directors) makes no representations or warranty, express or implied, as to their accuracy or completeness or correctness. Therefore Elkstone accepts no liability for loss arising from the use of the educational material contained within this newsletter.