Due to a series of events, such as U.S.-China trade war, the Fed’s interest rate hike and the French 'yellow vest' protests, the global stock market has suffered losses in 2018. All sectors in the market have recorded considerable losses.

 

On March 22, based on USTR’s Section 301 report, President Donald Trump signed a memorandum, instructing to impose tariffs on $60 billion of Chinese imports and restrict Chinese enterprises investing in U.S. mergers and acquisitions. In response, the Chinese Ministry of Commerce carried out tariffs measures, which announced the official start of the trade war. Since then, frequent disputes between the two sides affected global market sentiment negatively. At the G20 summit in December 2018, President Xi Jinping and President Donald Trump reached an agreement on holding a 90-day negotiation, and suspended new trade measures during the negotiation period.

 

As an indicator of the global economic market, the trend of the Fed’s rate attracts huge public attention. Although there were only 155,000 new jobs created in November 2018, the Fed was still optimistic about the U.S. economy. In the last meeting in 2018, the Fed decided to raise the interest rate to 2.25%-2.5%, which was the fourth rate hike in 2018, and the ninth since the Fed started the cycle three years ago.

 

The European market also struggled in 2018. Many economic systems in the European Union suffered troubles: in France, the 'yellow vest' protested against President Markron on the reform of agenda; Germany faces a political transformation that Chancellor Merkel was forced to step down from the party chairman and will retire at the end of this term; the Italian populist government and the European Commission have been arguing over the 2019 budget draft; the Polish government has accepted the so-called “non-liberal democracy” and is pursuing policies that inconsistent with E.U. values; the Spanish government is still at a weak position; in the UK, the internal differences of the Conservative Party have hindered the Brexit progress and also hindered policies that can promote growth and productivity.

 

Nearly all major financial assets recorded negative returns in 2018. CSI 300 Index and MSCI European Market Index have dropped nearly 30% and over 15%, respectively. In the U.S. market, a 6% plunge in S&P 500 have already catapulted the market into a bear one.

 

 

 

Strategy Performance

 

AQUMON SmartGlobal® (HK ETF) provides asset allocation services for investors by investing in Hong Kong-listed exchange-traded funds (ETF). This helps investors achieve long-term growth in their assets by riding on the sustainability of economic growth.

 

To come up with long-term global asset allocation portfolios, AQUMON SmartGlobal® (US ETF) considers factors such as assets under management, listing date, transaction fees, tracking error and liquidity to select the best ETFs from a pool of over 200 in the Hong Kong market. The pool of ETFs covers different sectors in more than 30 countries.

 

 

 

Performance Analysis

 

1. In the portfolios, 3101 (VANGUARDDVEUR), 3147 (CSOP CHINEXT), 3140 (VANGUARDSP500), and 3169 (VANGUARDCHINA) declined the most. These segments represent the most important countries and regions in the global stock market.

 

2. In the bond market, the strategy allocated to 3141 (BMO ASIA IGBONDETF) and 2813 (CAM CTPB BOND), which decline slightly. The differences between the conservative and the aggressive portfolio was large. In addition, the allocation to 3081 (VALUEGOLD ETF) also helps hedge part of the risk.

 

In fact, high volatility of the market this year can be explained from investors' concerns about trade war. Since President Trump announced to impose tariffs on imported steel and aluminium products in March, trade friction between China and the United States has intensified. And President Trump’s trade protectionism has caused panic in global stock markets, making the panic index (VIX) hit 37.32%. Although the VIX index fell after the negotiation, it again climbed to a high point in December after the United States asked for the arrest of the CFO of Huawei.

 

 

Going into 2019, the market is still full of uncertainties. High volatility is becoming a commonplace. In the coming months, the market is likely to be affected by the trade war, the Iran situation, America’s election, political stability factors in European countries and many more.

 

In order to cope with increasing market volatility, investors have to maintain a diversified portfolio to acquire long-term growth while minimizing risk.

 

As a trusted robo-advisor, AQUMON will continue to monitor global financial markets and client’s portfolio, and provide round-the-clock wealth management services to make investing as effortless as possible for our clients.

 

 

Benchmark

 

The benchmarks consist of the following indices with a corresponding ratio. For fair comparison, the volatility of the benchmarks selected by Magnum Research is similar to the corresponding investment portfolios.

 

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Conservative Portfolio

 

The Conservative Portfolio, due to its high weighting in fixed income products, is the best option for users with low risk preference. It provided a -6.57% annualized rate of return in 2018, exceeding benchmarks by 0.74%. The three-year long-term portfolio performance is better than the benchmark’s.

 

 

 

 

Moderate Portfolio

 

The Moderate Portfolio aims to offer users steady investment return. The fixed-income portion in the portfolio is mainly used to hedge against the stock market risk. It generated a -7.63% annualized rate of return in 2018, exceeding benchmarks by 1.32%. The three-year long-term portfolio performance is also better than that of benchmark.

 

 

 

 

Balanced Portfolio

 

The Balanced Portfolio is built to find the balance point between risk and profit. It has a proper weighting in both stocks and fixed-income products in order to minimize volatility and diversify inherent risk from stock investments. It generated a -9.57% annualized rate of return in 2018, exceeding benchmark (-9.78%) by 0.21%. The three-year long-term portfolio performance is also better than the benchmark’s.

 

 

 

 

Growth Portfolio

 

The Growth Portfolio has increased weighting in stocks in order to maintain long-term growth of the portfolio while taking on a slightly higher risk level. It provided a -10.08% annualized rate of return in 2018, outperforming benchmark by 1.34%. The three-year long-term portfolio performance is also better than that of benchmark.

 

 

 

 

Aggressive Portfolio

 

Aggressive portfolio, due to its high exposure in stock products, is best for investors that are more aggressive and have higher risk preference. This portfolio provided a -10.58% annualized rate of return in 2018, outperforming the benchmark by 2.48%. The three-year long-term portfolio generates better performance than benchmark’s.

 

 

 

 

 

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