Over the last year, policy divergence among the largest economies has been reected not only in their own economic performance, but also in that of other economies. A worsening trade environment is likely to exacerbate these divergences, and is a material risk to growth going into 2019. The global cyclical upswing reached its two-year mark and the pace of expansion in some economies appears to have peaked. The synchronised global growth is long gone, leaving domestic demand as the key driver. IMF global growth forecast for 2018 was projected at 3.9% in April this year, however, they will be revising this gure in October.

We are at the stage of the policy tightening cycle in advanced economies which has contributed to the build-up of nancial vulnerabilities. In this peculiar setting, history suggests a higher likelihood of accidents in nancial markets and recent events support this view where markets buffeted by negative headlines from Italy, Turkey, Argentina, and broader emerging markets. Although, there are some idiosyncratic risks, they are being magnied by a persistent and steady Fed tightening cycle and the European Central Bank (ECB) slowly phasing out their Quantitative Easing (QE) program.

Going into autumn, the United States (US) economy expanded at a solid 4.1% over the second quarter of 2018 and 2.9% year-on-year (y/y). Bolstered by pro-cyclical policy, the US labour market is nearing full employment, consumption is robust as wage growth picks up, and investment continues to be boosted by tax cuts, regulatory reforms, and scal spending. The conuence of the robust private and public sector has put the US growth on a divergent path from that of the global economy. Across the Euro-zone, growth remained steady in the second quarter of 2018 at 0.4%, while y/y growth declined to 2.1%. The European
Commission noted that their aggregate measure of consumer and business condence declined to its lowest level in more than a year during September. Additionally, all of the economies in Europe will be negatively affected by rising oil prices, persistent geopolitical uncertainty, impacts of Brexit, poor scal discipline in countries such as Italy, ongoing trade tensions and the shift to the populist right. However, growth projections remain strong for the area driven by countries such as Germany and the hope that the EU and UK will strike a deal for Brexit.

While the US and other advanced economies are still growing, the short-term concern in the global economy is centered in emerging countries where the growth divergence is becoming more evident. Countries such as Turkey, Argentina, Indonesia and South Africa are suffering from outows of money, depreciation of their currency and therefore an increase in the burden of foreign currency denominated debt creating a challenging environment for the region.

Global equity markets advanced in the third quarter, driven primarily by the US market where the S&P500 generated returns of 7.7% and which more than compensated for the weakness in Europe and Emerging Markets. The rally in US was underpinned by the strength of the economy, which combined with lower tax rates drove robust growth in corporate earnings. Emerging Market equities came under pressure on the back of currency volatility and the intensication of the trade war between the US and China. While earnings momentum remains strong, we are now seeing a moderation of expected growth rates as corporates are
increasingly concerned over the impact of the trade war and the economic pressure on Emerging Markets as interest rates normalise. Despite the upward trend in interest rates, equity markets remain more attractive than bonds and forward valuations for the key indices have come off from peak and are in line with long term averages.

The current environment presents signicant opportunities for stock-pickers such as ourselves, as we are often able to purchase high-quality companies at a signicant discount to their market value. The Oasis Crescent Global Equity Fund portfolio valuation is attractive relative to the DJIM Index on most metrics while maintaining a lower beta than the index. The companies in our portfolio have strong balance sheets which should provide downside protection in a normalizing interest rate environment while strong free cash ow yields should allow for value enhancing opportunities such as share buy backs, to be pursued. Our
companies have a proven track record of delivering strong returns throughout the cycle, but are still trading at a signicant discount to the market. Oasis has successfully navigated turbulent economic cycles since its inception and we are condent that our portfolio is well positioned to provide attractive risk adjusted performance for our clients over the long-term.

Oasis International Feeder Fund has amalgamated into Oasis Crescent International Feeder Fund.