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You may have noticed just the slightest trace of cynicism in last month’s report as we recounted our assertion that the mark-down in equity prices in the last two weeks of May was entirely unnecessary and had not been a true reflection of economic reality.

We am pleased to say that this assertion was well-founded and has been proved to be correct thus far as share prices in June have already recovered to their levels before the synthetic May write-offs. Our irritation as these occasional periods of false pricing is unbounded as is our scepticism with regard to the financial analysts who tend to produce self-serving or badly researched reports and market makers who over-react to irrelevant market noise, gossip and waffle. Sadly, it is something we are wearily familiar with and are practised, on most occasions, in interpreting reality from a false narrative. In dynamic markets it is a skill that requires patience, practical experience and an understanding of market action.

A significant number of the analysts whose work we have observed over the years tend to have all the personality of a poker but lack even the modest benefit of its occasional warmth. They know the effect that a negative analytical report will have on a market sector or on an individual company’s share price but far be it for us to even hint that it might be in their own interests to ‘encourage’ a share price to move lower in order that they (or their organisation) can buy it for their own account at an artificially low price. Perish the thought. Strangely, though, a short time later the share price or the market itself often then tends to move higher again.

Fever Tree (the up-market mixer drink producer) is the only company specific holding we currently have in the UK market. As an example of the idiocy and absurdity too often prevailing in reports from financial analysts (Nigel Lawson used to call them teenage scribblers and he wasn’t often wrong) a report was issued by one of this happy but barmy army in mid-May in which he had taken supermarket only sales figures from the first two weeks of the month and, on the assertion that the weather was expected to be very poor over the summer months too, he then extrapolated these numberss as if they were a proxy for the entire year. On that basis he then concluded, with the full confidence of his own foolishness, that Fever Tree’s sales would fail to meet expectations and be very poor for the 2019 year as a whole. On the back of that flimsy confected ‘evidence’ the share price immediately dropped by 10%. Two days later the shares had regained that 10% and moved even higher again. Economic reality or absurd folly?

Volatility is one of the inherent features of equity investment and Quotidian has long, hard-earned and successful experience in navigating these occasional absurdities, pitfalls and stock-market gyrations.

For the past year or so one of the main areas of market focus has been the putative trade war between the USA and China. In our January report we highlighted the fact that in 2018 China had posted a trade surplus with the US of $351.76 billion, a surplus that President Trump is determined to bring more into equitable balance.

Presidents Trump and Xi were due to meet (for the first time since their positive discussion early in 2018) at the G20 gathering on 29th/30th June and we await news on the outcome of their discussions. Positive progress towards a reasonable trade deal will be a boost for equity markets (and particularly the US markets); continued negativity and entrenched positions are already largely priced in although they may still cause a short term knee jerk reaction.

The US/China trade debate has diverted attention away from the ongoing failings of the EU economy and Trump’s enduring aim to end blatant EU protectionism (which is at the heart of the declining EU federalist project). Examples of this protectionism and the trade tariffs that support it can be found in the way that French wine is traded between the EU and the USA. The EU levies rates of between 11 to 29 cents per 75cl bottle of American wine imported into the EU whereas America charges just 5 cents for similar sized bottles of French wine imported to the USA. There are similar imbalances (always, of course, in the EU’s favour) in respect of Spanish olives and German cars. The list is extensive and illustrates the ongoing legacy of economic myopia from the Obama regime.

But the real problem for the EU is that the German economy (by far the largest economy in the EU) is already in recession and the potential of increased import duty on German cars going to the USA (tariffs which Trump has already threatened to impose) would have a devastating effect both on Germany itself as well as the EU’s GDP. At a time when the German auto industry is also under threat from Brexit, Trump’s threats are well timed (from both the US and the UK’s points of view). When Brexit is finally achieved it will provide positive motivation to a UK stock-market that has been largely moribund for much of the past three years.

Of course, Trump also has an advantage in that one of the leading figures in trade negotiation from the EU side is Guy Verhofstadt…..well known for his bumbling, self-important incompetence in Brexit negotiations. I’m sorry to repeat the same (or a very similar) joke twice: Verhofstadt has all the intellectual capability of a traffic cone but sadly he also lacks its external brightness too.

You will no doubt have read about the troubles afflicting Neil Woodford and the various funds under his management. There is no doubt that Woodford is a bright and pleasant individual who has had a long period of success as an investment manager.

Sadly, though, the Americanisation of the City since the early 1990’s has brought with it the American obsession with celebrity culture and thus the creation of ‘star names’ in the world of investment management.

With that in mind and having had years of demonstrably high achievement under the Invesco Perpetual banner Woodford was encouraged to establish a fund management business under his own flag in 2013.

The trouble with being a high profile ‘star’ is that it causes a huge and uncontrollable inflow of new clients and substantial additional sums of money to manage. The danger with this is that the sheer volume of monies he then has to find investment avenues for often means that the fund manager loses the ability to be quick on his feet and be able to react quickly to market opportunities or market risks.

Star status also tends to mean that the fund manager loses touch with his clients who ( just by virtue of the over-extended business size) mutate into numbers rather than names. It essentially depersonalises the business itself which then becomes simply a vehicle for creating fees.

In Woodford’s case that size pressure played its part in forcing his hand towards investing in a large number of very small and consequently illiquid companies (and, in so doing, exceeding the fund’s maximum allowance for illiquid investments).

When clients then want to withdraw their capital a fund manager who is over-exposed to illiquid investments finds it difficult (if not impossible) to sell these illiquid positions and so is obliged to disinvest from those profitable liquid holdings that he would very much prefer to keep. This, of course, creates a domino effect and a downward spiral.

Whilst the financial media (most of whom would struggle to boil an egg and wouldn’t know one end of an equity trade from the other) are generally unforgiving and assert that his problems have been self-generated, we sympathise fully with the awful situation Neil Woodford (a decent man) now finds himself in.

In the six years and one month since 2nd June 2014 when Woodford founded his flagship fund (the Equity Income Fund) it has produced a negative investment return of -6.60% (‘A’ Share Class, Accumulation units, ie. total return) up to the present day (30th June 2019). The FTSE over exactly the same period has increased by +8.49%. Modesty forbids me from mentioning that the Quotidian Fund has returned +39.17% over exactly that same timeframe (and that figure is net of all charges).

By contrast to the Woodford organisation, and to avoid losing the personal touch that is the essence of Quotidian’s business model, we have a self-imposed maximum number of clients for whom we will act. We take great care to avoid investing in illiquid companies (or, indeed, anything that we cannot extract ourselves from at a moment’s notice). We know our clients in the fullest sense of that phrase and we never want to lose this particular level of personal service and care.

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Following four consecutive months of substantial recovery from the 2018 correction it is in the nature of equity markets to then pause for breath with another short-term correction. In the middle of May and from a clear blue sky, therefore, global equities suffered a markdown in prices which has taken some of the gloss away from the sizeable upward momentum that had been generated since the start of the year.

It is blindingly obvious that market analysts simply do not know how to interpret the ongoing negotiations between China and the USA in pursuit of a comprehensive trade deal. It is equally clear that in the absence of intelligent and reliable analysis, simply negotiating their way across the road unaided seems to stretch market maker’s ingenuity and imagination to its limits and so they find it much easier to simply put a red pen through equity prices across the board until a greater degree of clarity emerges.

As a consequence of that we are currently seeing exceptional levels of volatility once again but, as has been re-inforced historically (and particularly reasserted over the past six months) equity markets inevitably bounce back and resume their upward momentum. That assertion is supported by the fact that (despite market-makers inate pessimism) the last two quarterly earnings seasons in the USA have indicated that its strong economic progress continues. The best US companies have produced brilliant corporate results which provide proof positive that, in the real commercial world, they continue to show growing sales and increasing profits.

This latest spat in trade discussions between the USA and China was triggered by a series of tweets from President Trump threatening to impose another range of tariffs onto Chinese goods. This blatant negotiation tactic simply follows a well-trodden and familiar path and is becoming rather tedious to observe. The retaliatory tariffs then imposed by China fall mostly onto the US agricultural industry. For example, the highest in the Chinese range of tariffs (25%) are being applied to peanuts, spinach, sugar, wheat, coffee, chicken and turkey. The Chinese equivalents of Charley Brown and Popeye will clearly be in the van of those who will suffer worst!

The rest of us look skywards for divine inspiration and, on earth, to the Dalai Lama for guidance in the skills of patience and the control of exasperation! One of the largest US market making operations at least had the grace to admit that equity pricing during this month’s correction has been nothing more than guesswork.

On 31st May 2019 the FTSE100 index closed the month at 7,161.70, a fall of -3.46% in the month of April itself and it now stands at +6.44% for the 2019 calendar year to date. By comparison the Quotidian Fund’s valuation at the same date shows a fallback of -9.71% for the month of May and the Fund is now up +12.67% for the 2019 year to date.

Analyst’s reports are jam-packed with ‘if, could and possibly might’ which serve to illustrate their lack of certainty and inate preference for negative pricing. It is often just guesswork with a bias towards negativity.

By a process of thought that raises more questions than it answers about the inate negativity and self-interest of the investment industry’s highly esteemed market makers, it obviously makes great logical and economic sense to them in that the most severe markdown in equity prices have been applied to the technology sector.

We recognise, of course, that the revenue exposure to China of companies like NVIDIA and Broadcom (who earn 50% of their revenue from that market) leaves them exposed to the possibility of further retaliatory actions. The situation with Huawei and the major US chipmakers being under Presidential diktat not to supply it with hardware or software is also concerning the stock-market but we simply don’t yet know if China will make any additional retaliation and, if so, what form that retaliation will take.

Following Trump’s latest round of tariff increases Chinese negotiators made a particular point of saying that China would not ‘weaponise’ its financial holdings in the USA. That statement is, of course, a shot across the bows and a thinly veiled threat of the economic damage that might be caused to the US if China so wished. For the moment that is just a negotiating stance…..but it could give Trump pause for more profound thought and a modification of his tactics. Rarely, if ever, has Trump had to negotiate with an adversary who has at least equal, if not greater, financial power than himself.

Thus the financial incompetence, economic illiteracy and sheer commercial idiocy of Obama’s years in power still acts as a brake on the US economy today. Obama’s spendthrift regime was financed to a large extent by the issuance of Treasury Bonds (the US version of Gilts in the UK) and which are essentially cheap and seemingly “risk-free” loans to the government from bond investors. China now holds the eye-watering sum of $15.9 trillion in T-bonds which (in addition to its huge equity holdings in US stockmarkets) gives it enormous financial leverage in current trade negotiations. As ever, there is eventually a price to be paid for the Obama regime’s period of deliberate gross over-expenditure.

On the positive side of that both parties are fully aware that a comprehensive trade deal will be in the best interests of both countries and so I have little doubt that a fair and reasonable trade deal will ultimately be agreed. However, Trump needs to understand the vital importance in Chinese culture of not losing face. China’s response to Trump’s standard approach of bullying tactics will be key to whether an early resolution of this ongoing dispute will be agreed. The Chinese simply will not be humiliated or forced to back down. Our view is that the current bout of equity market weakness will actually put US/China trade talks back on track.

On the more pessimistic side, there are differing economic views on how serious a long period of dispute would be and the current stock-market turndown is based entirely on the easy option of just marking down prices. Against that, Goldman Sachs research believes that the effect on economic output of an extended trade argument would be less than 1% in both countries and therefore would not be drastic.

Another positive signal is that a cut in US interest rates in 2019 is now rated by currency markets at over 80% and that would provide a very constructive boost to equity markets.

Less tangible but more interestingly, Trump is obsessed with the strength of the US stock-market as a proxy and measure of his success as President. He knows that his chances of re-election in next year’s Presidential election will largely depend upon the US markets being much higher than they are today and there is little doubt that he will seek to secure the support of Wall Street with that aim in mind.

The final trading day of May added insult to an already poor investment month. Another surprise tweet from Trump gave advance notice of tariff sanctions to be applied to Mexico (despite a recently executed free trade agreement) if the Mexican government do not do more to restrict illegal immigration to the USA. The usual Trump tactics and no doubt they will facilitate the velocity of Mexico’s compliance. But the immediate knee-jerk reaction from market-makers was to create another round of equity price reductions in all global markets.

We remain of the opinion that this a a time to keep clear heads and hold our nerve. May’s nonsensical market action and unnecessary price reductions will pass and equity valuations in the US will return to a point where they properly reflect the reality of growing corporate profits and increasing future sales.

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“Time reveals everything” is an old adage which is particularly true of the financial world. As you will no doubt recall, the 2018 investment year as a whole was dreadful and, from our own high point on 30th September, Quotidian’s performance mimicked the market’s downward trajectory so that our result for that calendar year was dismal too.

In particular, the last quarter of 2018 was one of the most difficult periods in global stock-makets since the depths of the financial crisis of 2007 to 2011. We did suggest at the time that this severe markdown was artificial, synthetic and overblown.

Here we are just four months later and, indeed, time has put the travails of 2018 into better perspective. In support of our contemporaneous assertions, we can now see that by the end of April 2019 the most attractive of the global markets (the Nasdaq and the S&P500; both in the USA) have already recaptured the reduction in equity valuations of the last three months of 2018.

On 30th April 2019 the FTSE100 index closed the month at 7418.22, a rise of +1.91% in the month of April itself and it now stands at +10.26% for the 2019 calendar year to date. By comparison the Quotidian Fund’s valuation at the same date shows an increase of +4.52% for the month of April and the Fund is now up +24.79% for the 2019 year to date.

Quotidian’s investment strategy is based upon being (or at least aiming to be) in the right sectors of the right markets at the right time.

With that in mnd and on the basis that a picture paints 1000 words, I attach two graphs for your information and interest. The first illustrates the extreme volatility of global stock-markets from 1st January 2018 up to the present day and the second graph shows the performance of the most important of the worldwide markets from the start of 2019 up to 30th April.

These graphs confirm that the leading three equity markets for a GBP investor thus far in 2019 are China, the Nasdaq and the S&P500. It is no coincidence, therefore, that our current portfolio is 80% invested in those two US markets and 20% invested in UK Smaller Companies.

We do not invest in China simply because long experience of that market leaves us feeling less than secure about its corporate governance, the lack of quality of economic and financial information emanating from that country and our concerns over its stock-market illiquidity.

Simliar concerns negatively influence our view of Emerging Markets. We also remain shy of the relentlessly underperforming stock-markets of Europe until such time as its political and financial woes are better managed.

Our strategy should not be seen as dogmatic; our thinking is flexible and our decision-making can be mutated to suit current market conditions and ever-changing circumstances.

Time does reveal all and visual aids hopefully help to illuminate my usual dull commentary ……..but please don’t think for a minute that I won’t continue to use a 1000 words anyway in future reports!

Graph Showing Financial Markets from 1st January 2018 to 30th April 2019

Graph Showing Financial Markets from 1st January 2019 to 30th April 2019

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The large and medium sized company sectors of the UK market (as represented by the FTSE100 and 250 indexes) continue to wallow in the fog of Brexit and so (with just one exception) we remain shy of anything other than generic exposure to UK smaller companies.

Our only stock-specific company holding in the UK is Fever Tree, the premium tonic water and mixer maker. Fever Tree declared its latest set of results on 26th March and their figures were spectacularly good. The company reported a 40% increase in sales for the 2018 year and a 34% increase in profits for that same period. Sales in the UK rose by 53% and the company’s expansion into the USA is set to add further impetus to this demonstrable success story. Fever Tree’s share valuation is already returning to a level that reflects its continuing growth.

A recent official report from Germany’s ‘Centre for European Policy’ shows that the euro has brought a net gain 0f 21,000 euros per person to the Germans, whereas in France it has cost 56,000 per capita and in Italy 74,000 euros……and both France and Italy are expected to accept this disadvantage on the basis that it is apparently all for the greater good of the European ‘project’.

As we have stated many times over the years, there has only ever been one economic beneficiary of the EU project and that is Germany. We remain deeply sceptical of European stock-markets too as the Eurozone’s three largest economies (excluding, of course, the UK) are in recession and the ECB have run out of ammunition in respect of the financial levers that have papered over the cracks and brought superficial short-term relief in the past. Even the golden tongued Mario Draghi is struggling to put a positive spin onto his usual propaganda as the realities of the EU’s financial and economic woes mount. He is reduced to following his well trodden path of obfuscation, denial and bluff.

Markets are fully aware that the ECB cannot raise interest rates (for fear of turning a recession into a full blown slump) and, with brilliantly inept timing, the ECB terminated its quantitative easing programme at the end of 2018, just as it was about to be needed most.

The incompetent, indecisive and weak ongoing efforts being made by the UK parliament to resolve Brexit in a democratic, realistic and equitable way continue to suppress any substantial and sustainable progress in the UK’s stock market. Devoid of leadership and lacking even basic negotiating skills we are still no nearer to a satisfactory denouement than we were two years ago.

There are fundamental but vitally important differences between the UK and the EU project that never seem to have entered this unending debate. For example, the basis of British law is that an individual is free to do anything he or she wishes unless it is specifically and legally prohibited. An endearing element of British culture to counterbalance any potential misuse of that freedom is that (even in today’s more cynical and less gracious world) the majority of people self-police their behaviour and take care not to infringe, impair or reduce the freedom of others.

The basis of EU law, however, is that nothing can be done unless it is specifically permitted. These differing approaches and the philosophies behind them (freedom of choice , freedom of speech and free trade versus governmental diktat, command and control) are in direct opposition to each other. This has an impact on economics, finance and, in particular, their approach to trade.

Historically the UK has a long-standing belief in free trade and, by extension, its close association with capitalism and democracy.

Free trade is a positive means by which we can spread prosperity as wealth cascades through the economy. Prosperity underpins social cohesion and, in turn, social cohesion underpins political stability. Political stability is the bedrock of a collective (and peaceful) society.

The EU adopts a different philosophy. It is deliberately anti-democratic and its innate protectionist approach abhors free trade (other than internally between the EU27 where it is largely for the benefit of German manufacturing industry and French farmers). Instead, the EU adopts a command and control economic system hand in hand with a tax and spend fiscal philosophy. This can be likened to giving £20 to an alcoholic; you know exactly what he’s going to do with it, you just don’t know which wall he’s going to use.

Taxation is an innately unfair and negative way of redistributing wealth and is typically favoured by a socialist goverment (which of course is what the EU is). Taxation penalises success and progressively reduces the motivation to achieve further success (either through taking business risks or simply by working harder) whilst it encourages a reliance upon a benefit culture within a welfare state and thus rewards idleness and economic inactivity.

Given the very different legal systems, political beliefs and economic cultures between the UK and the EU, negotiations to achieve Brexit were always going to be complicated. Sadly, the ineptitude of the UK side in lacking courage, lacking imagination, lacking belief, lacking even a scintilla of negotiating skill and meekly allowing the EU to hold the initiative and manipulate the agenda has resulted in a cul-de-sac (I wonder what the French for ‘dead end’ is) and an increasing likelihood of the entire circus continuing for a few more years into the future.

In the meantime stock-markets both in Europe and the UK will, by and large, remain hobbled and of little or no investment interest. Much better opportunities continue to exist elsewhere.

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Despite political concerns that are still supressing some areas of the global equity markets we continue to regain some of the ground that had been ceded in the fourth quarter of 2018. Our strategy of focusing on the most attractive companies in the most attractive sectors of the most attractive markets at any given time does help in this process but, given the inherently dynamic nature of stockmarkets, it is sometimes easier said than done. At the moment the most attractive of the world’s equity markets is the USA and it is unsurprising, therefore, that our current holdings are biased in that direction.

The US economy remains in rude health and its central bank (the Federal Reserve) is now more inclined to keep interest rates at their current level (albeit under a degree of political pressure). US inflation is stable and unemployment is now at a very low level indeed (virtually at a level that economists would describe as ‘full employment’).

Taking that as the macro-economic background, the micro-economic position adds support to the assertion that the USA economy is performing very well. The fourth-quarter reporting season in the USA is now done and dusted and, of our 22 company-specific holdings, all have now issued their results. As anticipated in last month’s report, all bar one of them have beaten expectations and posted positive surprises.

Trade tensions between the USA and China have weighed on market sentiment over the past year and President Trump had threatened to expand the range and increase the size of tariffs if a trade deal had not been finalised by 1st March. However, in mid-February he announced that the imposition of these tariffs had been postponed and this has been taken as an indication that the execution of a trade deal is imminent.

Our January report highlighted the extraordinary imbalance of trade between these two countries (significantly in China’s favour) and it would appear that China has now agreed to rebalance that discrepancy by committing to a programme of buying American goods and services to the value of $1.7 trillion over the next six years. That would represent a huge change in China’s historic economic model (which over the last 20+ years has been based on production and exporting) and whilst that, if it happens, would be great news for the USA it would cause less helpful knock-on economic effects around the world.

Quite simply, if China was to spend $1.7 trillion on US goods that would seriously reduce the value of goods it could buy from other countries. The opportunity cost to large areas of global industry could put considerable stresses on the economies of other manufacturing economies (the impact on German car manufacturers is but one example of the critical damage that could be caused). It is worth bearing in mind that:

Trump’s mantra from his first day in power has been ‘America first’ and, whatever one might think of him as a personality and whatever mud the media might like to throw at him, he has demonstrably fulfilled that pledge.

China’s political leaders have a long history of promising one thing and actually delivering something completely different. I recall some sage advice I was given 30 years ago:

You can always do a deal with China but you can rarely do a smart and profitable deal with China.

Before we get too carried away with the potential advantages to the US economy and the commensurate strains elsewhere, let’s wait to see what actually emerges from these ongoing negotiations.

We see no point in commenting further on Brexit, which remains as an albatross around the neck of the UK stock market. The complete lack of political leadership, intelligence and belief shown by Mrs May combined with her shameless mendacity has turned the entire process into a farce of Brian Rix proportions (but without the humour). A market analyst who clearly spent his earlier years following the exciting hobby of train-spotting has calculated that May, in her monotonous fashion, has announced 108 times that Britain would be leaving the EU on 29th March 2019. Last week she reneged on that. It is pointless trying to make any serious investment judgements in respect of the UK and the EU until this long and fruitless saga is over.

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Global stock markets have ended their fourth-quarter 2018 slide and staged a solid rebound this month.  Reassuringly, one issue that investors had been worried about has also been resolved: following its meeting on 29th/30thJanuary the Federal Reserve (the central bank of the USA) has signalled its intention to abort its quantitative tightening program which (given the extremely negative effect it had had on equity markets) is very good news indeed.

Quantitative tightening is a monetary policy applied by a central bank to decrease the amount of money within the economy.  With the benefit of hindsight it was, inter alia, that policy that had helped send the stock markets into a frenzied tailspin during the fourth quarter of 2018.

On 31st January 2019 the FTSE100 index closed the month at 6968.85, a rise of 3.58% in the month of January itself and it now stands, of course, at 3.58% for the 2019 calendar year to date too.  By comparison the Quotidian Fund’s valuation at the same date shows an increase of 13.09%for the month and so it follows that the Fund is up 13.09% for the 2019 year to date.

It now seems that the severe equity market markdowns in the final quarter of 2018 were largely a reaction to the Federal Reserve’s interest rate policy and monetary tightening.  One could be readily forgiven for saying that this was a gross over-reaction by analysts and market makers.

On the back of a demonstrably strong US economy, the Fed raised interest rates four times in 2018 in a robotic, pre-ordained and seemingly careless “painting by numbers” approach. When it met in December the central bank issued a projection that it expected to raise rates twice more in 2019, albeit that that figure was downgraded from its previous projection of three times.

However, financial markets still continued to tumble substantially, disturbed that in his subsequent news conference, the Fed chairman (Jerome Powell) had given a very positive view of the US economy yet appeared to suggest that the Fed would still resume raising rates in the coming months.

Since then though, Powell and other Fed officials have (under rigorous criticism and, no doubt, impartial and gentle guidance from President Trump) emphasized their firm intent to be “patient” in their approach to rate increases and they have reaffirmed that there is now no “pre-set course” for future increases.

As a result, equity futures markets have put the probability of a rate hike at any time in 2019 at just 22 percent.  In typical Cassandra-like fashion though, a few doom-laden analysts are predicting up to two Fed rate increases in 2019, though not until the second half of the year.

We believe that the Fed has been and will continue to be under extreme political pressure to hold interest rates steady rather than risk tipping the currently buoyant US economy into recession.  Equity markets have risen accordingly.

Conversely, the Mayhem caused and the resulting pig’s breakfast being made of Brexit continues to supress the UK stock-market.  It is clear from the recent unedifying spectacles in the House of Commons that the chief negotiator on the UK side does not know his Acas from his Nalgo.

In Europe, the German and Italian economies are now officially in recession and France is on the cusp.  Despite the bombast from its leaders it is clear that the undemocratic, protectionist and financially incontinent EU project with its half-baked currency is failing. It beggars belief that elements of the British establishment still desperately want to cling to this sinking ship.

The fourth-quarter reporting season in the USA is in full swing and, of our 22 company-specific holdings, ten have now issued their results.  Of these, every one of them has posted positive surprises and their share valuations have been upgraded accordingly.  The remainder of our portfolio holdings will report in February and we anticipate similar positive outcomes above and beyond analyst’s projections.

The palpable fear and negativity that gripped equity markets throughout the last quarter of 2018 have thus far in 2019 been replaced by a sense of optimism, realism and normality.  Long may that persist.  We remain alert to the fact that there are potential headwinds still to be addressed and resolved.

Chief among those is the huge trade imbalance (in China’s favour) between the USA and China.

Overall for the full year of 2018 China posted a trade surplus of $351.76 billion.  Of that, its politically-sensitive surplus with the USA widened by 17.2 percent to $323.32 billion last year; the highest on record. It is abundantly clear as to why the US President has been so focused on redressing that remarkable imbalance.


Reports from the US during January suggest that positive progress has been made to secure an equitable trade deal between these two countries and, if that does become a reality, then another restraint on positive stock-market progress will have been removed.  We take a sanguine view and hope that the timetable of settling a deal acceptable to both sides is indeed executed by the putative 1stMarch deadline.

Despite the Quotidian Fund’s strong performance in January we are intensely aware that we have much more ground to recover before we claw ourselves back to the heights of 30thSeptember last year.  We remain committed and confident of so doing.