2019 was a tough year, with growth slowing to its weakest level since the Global Financial Crisis. Global activity was hamstrung by major policy uncertainty. Key was the ongoing Trade War between the US and China, with BREXIT and geopolitical events in the Middle East and Asia adding to the uncertainty. These caused a collapse in global trade, manufacturing, and investment. Against these, household consumption in more advanced economies remained supportive, preventing a sharper global slowdown, as job markets continued to benet from an expansion in services activity. The Middle East saw attacks on oil infrastructure and shipping. In Asia, protests in Hong Kong plunged its economy in recession.

The year ended with resolutions to two major sources of uncertainty. The US and China agreed to a so-called Phase 1 trade deal before another round of tariff escalations took effect, with the deal expected to be signed by mid-January. The UK held a General Election which resulted in a decisive majority for the incumbent Tory party. Central banks responded aggressively to last-year’s slowdown, easing policy both with respect to interest rates and re-extending quantitative easing, with scal support in some countries like China also helping. Although major central banks like the US Fed have signalled a pause, subdued ination means that they will not be in a hurry to reverse course. The combination of last year’s policy easing and the resolution of major uncertainties set the stage for a rebound in activity in 2020. Two immediate risks weigh on the outlook. US President Donald Trump faces an impeachment trial in the US Senate after having been impeached by the House of Representatives. And a major geopolitical event in the Middle East risks plunging the region into war.

Equity markets proved to be stronger than expected in 2019, with major indices posting gains in excess of 20%1. The profound shift in global monetary policy overwhelmed poor earnings and the multitude of political and geopolitical issues that might otherwise have proven problematic. Indeed, the gains made in developed markets came almost entirely from multiple expansion as growth slowed and earnings languished. The global equity rally came despite continued outows from stocks into bonds, through corporate M&A and stock repurchases.

The MSCI All Country World Index increased 27.3%2, supported generously by global equities, most notably powered by the US. The NASDAQ led all major US indexes, gaining 36.7%3. Globally speaking, developed markets appreciated nearly 23% over the year, while Europe outpaced the Asia-Pacic region 24% to 20% and Emerging Markets following with 18.6%4. At a sector level, looking specically at the US, Tech was at the top of the returns trifecta – quarter, year and decade. For 2019, the sector gained more than 50% on a total-return basis with Communication Services the next-closest at 33%5. The FAANGM (Facebook, Apple, Amazon, Netix, Google-parent Alphabet, and Microsoft), accounted for 35% of the S&P 500’s Q4 return and 31% of the S&P 500’s full-year return6. Full-year laggards were Energy and Health Care with “only” 11.8% and 20.8%, again underscoring the strong year that 2019 was7. As we look to 2020, momentum could persist for a little longer, particularly if economic data stabilise and the very recent ows back towards stocks gain impetus.

The current market volatility is ideal for active managers, as it present opportunities to pick some high quality companies which are trading at signicant discount to their intrinsic value. This is reected in the portfolio valuation of the Oasis Crescent Global Equity Fund which is at a signicant discount to the DJIM Index on most metrics. The Fund is invested in companies which are global leaders in their sectors, generate strong free cash ows, which enable them to pursue value enhancing opportunities such as share buy backs and mergers & acquisitions. Oasis has successfully navigated turbulent economic cycles since its inception and with strong focus on downside protection, we are condent that our portfolio is well positioned to provide attractive risk adjusted performance for our clients over the long-term.