3q-2019-trevor-gurwich-retail
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We do think that there's going to be continued volatility
and that volatility is going to be around the trade wars and
the issues that the United States and the Chinese government
today have in coming to a resolution on that trade war.
2019 has been a pretty exciting year. Returns have been good so far.
We had some surprises, though. In May, we were expecting
a trade resolution—or at least some type of détente—with
China and President Trump. However, that tended to go the other way.
So, it was more of a "sell in May" type of event.
However, the Federal Reserve of the United States changed their
interest rate trajectory. If you
remember last year we were
on an upward
sloping, stair-stepping, increasing trajectory, and now that
has reversed completely. So, we're looking to potentially 2 or 3
cuts in 2019, and that we believe has helped really support
the market. So, June so far has been a very strong month.
The China trade issue with the United States is one that is extremely
complex. It is one which goes over multiple cultures. It goes
over different time periods of decision making, and there are
expectations on each side that are very different.We think that there's
probably a 25% probability that there is some type of resolution in the
next 12 months. Probably a 75% probability that something happens
after 12 months. And there is also I should actually say a probability
that it doesn't happen. One has to really decide: Is President Trump trying to
put China in a box and contain China, or are we looking for a better deal?
What this means as a portfolio manager is very detailed attention
to portfolio construction. How do you set up your portfolios so that
they can be robust, whether there is a resolution to this trade war
or whether this lingers on for longer?
And a lot of that is finding
opportunities that might
be win-win types
of situations, whether there's a trade war or relief from that.
The IPO market has been extremely robust. One of the great things
about the U.S., the non-U.S. and the global small cap market is
that we receive 90 to 95% of all new IPOs. These are companies that are
coming to the market fully charged with new cash to go out and grow
their businesses with very ambitious
CEOs who are bringing in
new business models. We have seen companies like Crowdstrike,
which is essentially providing them some of the most sophisticated
data security and Internet security at an endpoint intrusion protection
for corporates coming to market. We are seeing companies like Revolve.
Revolve is an internet commerce provider that sells fashion items.
We're seeing a healthy appetite by investors who see the opportunity
of online commerce, who understand the total addressable
markets or the TAMs of these
businesses and who have
a lot of optimism
in terms of these businesses supplanting the old world.
That is really showing a lot of investor interest right now.
We do think that currently the
U.S. market is still pretty
strong, pretty robust,
employment's high. There's a lot of consumer confidence,
there's a lot of small business confidence, and if we can overcome
these trade war concerns, we can potentially
stop the decline in sentiment.