by | Feb 11, 2019 | Market updates


Shiny happy people

Planet Earth needs to accommodate another 2.3 billion more people by 2050 when the world population will be just shy of 10 billion. This is an increase of almost 30% from the estimated 7.6 billion people currently based here.

Source: Population Reference Bureau.

Gross miscalculation

Rock star bond manager, Bill Gross, who turned PIMCO into a global powerhouse and created the world’s largest mutual fund along the way, has announced his retirement at the age of 74 after a mediocre innings with Janus Henderson.

Helped by a multi-decade bull market in bonds and the financial crash, the billionaire manager built the PIMCO Total Return Fund up to almost $300bn by 2013, boasting an annualised return of 7.8%.

However, his later years at PIMCO were marked by acrimony forcing him to jump ship to Janus Capital in late 2014 at the age of 70. Since then, his unconstrained bond mandate, which included $700m of his own money, has struggled, losing 4% in 2018 alone.

Gross, who has donated $800m to charity, plans to remain an active philanthropist.

FAANGs lose some of their bite

The fourth quarter earnings of tech giants Facebook, Apple, Amazon, Netflix and Google/Alphabet (FAANGs) were something of a mixed bag for investors.

Apple, which struggled at the end of last year, gained 5.5% after it recorded all-time revenue records across multiple categories including cloud services.

In contrast, Amazon fell 2.7% last week, after weaker than expected guidance for the first quarter, while Netflix saw its shares fall as much as 4.3% in after-hours trading, despite beating expectations for subscriber growth.

Alphabet was also punished in extended trading after it reported thinner profit margins. Facebook was the highlight, gaining 11% on the week after it delivered strong numbers.

Central banks get gold fever

Global demand for gold jumped 4% last year as central banks went on their biggest buying spree for 50 years and investors stockpiled coins. Demand from central banks jumped 74% led by Russia, which added almost 275 tonnes. Turkey and Kazakhstan added more than 50 tonnes each, while Hungary and Poland also made large purchases.

As Quilter portfolio manager Stuart Clark explains, “This is the biggest move by central banks since Nixon was in the White House and dollar convertibility ended. Growth worries, geopolitical pressures and the volatile markets that accompany them have increased the value of gold as a diversifier.

“All this is driving the gold price which in turn has sparked a ‘gold rush’ of M&A deals among its miners.”

FT exposé takes German giant to the wire

Shares in Wirecard, the digital payments business fell almost 35% last week after stories in the Financial Times on Wednesday and Friday alleging a laundry list of fraud and wrongdoings by its Singapore office that extend across Asia and Germany.

Wirecard was only founded in 1999 but quickly grew fat furnishing financial services to online gambling and adult websites. The last decade has seen pronounced growth in the stock, which only last year replaced Commerzbank in Germany’s 30-stock DAX index and which, until last week, was worth more than Deutsche Bank.

Wirecard is no stranger to such allegations and the shares rallied 14% on Monday when chief executive Markus Braun described the matter as a “non-event”, but external investigations continue.

Allergan faces Botox wrinkle

A rival to Allergan’s Botox injection has been approved for use by the US FDA, potentially creating disruption in the cosmetic treatment market.

Evolus, the makers of Jeuveau, saw its share price rise 5% on the news as it is expected to be priced 20-25% lower than Botox and should be available from Spring 2019.

Botox was launched in 2002 and brought in $3.6bn of sales for Allergan in 2018 through its uses as a cosmetic injection but also as a treatment for migraines and bladder dysfunction.

Alternatives already exist but have yet to achieve Botox’s success, however, David Moatazedi, CEO of Evolus, said it expected its entry to be “very disruptive”.

This is the biggest move by central banks since Nixon was in the White House and dollar convertibility ended. Growth worries, geopolitical pressures and the volatile markets that accompany them have increased the value of gold as a diversifier.

Stuart Clark, portfolio manager, Quilter.

Chart of the week

Fintech growth continues: In 2018, venture capital backed fintech companies raised $39.6bn across 1,707 deals globally. Deals were up 15% year-on-year while funding surged 120% on the back of 52 mega-rounds or funding ($100m+) worth a combined $24.88bn.

CBInsights – 2019 Fintech Trends to Watch.

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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