April 2021

There is an old street adage that says “Sell In May And Go Away... “. We note, however, that with the advent of the Internet Age following this rule-of-thumb would have been costly in the last few years. Conversely, last March was painful for most investors as is this month of March. Whilst we struggle to explain the basis for the generic May adage, we have explanations for the last two ‘month of March’ washouts. Last year can be attributed to the flare-up of COVID-19 and this one might be attributed to the rising of longer-dated interest rates, the strengthening of the US$, further COVID lockdowns in Europe, a blow-up of a large hedge fund or family office and the resulting mayhem of margin calls with their fire-sale liquidations.

No, it is not yet time to coin a new adage for March... Whilst we have been wrong footed with this rather brutal fall of equities, we think the current situation is likely to present a good base for replicating the reaction we saw last April. A huge and long-lasting rally across much of the equity markets. Let’s see why this may well be a reasonable view:

Yes, it remains our mantra - Away from bonds of all types as they offer little reward for any unit of risk taken, stay in equities. No assurances, but the best odds for finding capital appreciation. Just do tighten your seat belt, as the ride might be choppy... The Hedge-fund blow-up last Friday on margin calls gave us a whiff of the 1998 Long-Term Capital blow-up which dragged down the financial system. It may be a canary in the equity-mines as hedge funds are stretching to find returns and justify their existence. To paraphrase, if it can blow-up, it will. Stay long, hold on tight and you are likely to be well rewarded. “If you get up in the morning and think the future is going to be better, it is a bright day. Otherwise, it's not.” Elon Musk.