Andrew Dalrymple's letter - 4th quarter 2019

The Strategy has had a slightly disappointing quarter, in that it has underperformed the benchmark. That said, the result for the whole year is highly satisfactory. The recent underperformance can largely be attributed to the large rotation from growth stocks, to lower value, defensive counters, which took place in early September, and which left growth shares somewhat unloved throughout the last few months of the year. The catalyst for this change of tone in the market was a sharp rise in bond yields (which had been declining inexorably), provoked by expectations of higher inflation, accelerating growth in the USA, and a more “hawkish” Federal Reserve (in contrast to the loosening in July). This, as is invariably the case, sparked an enthusiasm for “value” stocks, at the expense of “growth” equities, and indeed low P/E stocks massively outperformed high P/E stocks in September. Given that, as we have a growth stock Strategy, underperformance in these circumstances is inevitable.

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