21 January 2021
Watch Freddy Lim, StashAway Co-founder and Chief Investment Officer, and Philipp Muedder, Head of Financial Planning discuss the latest global events and their impact on the markets.
In this episode:
Joe Biden begins his presidential term [0:55]
What Janet Yellen brings as the Treasury Secretary [2:12]
Jack Ma emerges for the first time since the crackdown on Ant Financial [4:08]
Will ERAA® move out of the all-weather strategy? [8:49]
00:01 | Philipp
Hello and welcome, everyone, to another weekly market commentary from StashAway. Of course with us, our Chief Investment Officer, Freddy Lim. Freddy, how are you?
00:11 | Freddy
Howdy, everyone. A good start to the week and again, still early in the year. I just want to say again, Happy New Year to all of our listeners who have been tuning in.
00:24 | Philipp
And we've hit a small milestone, Freddy. We've just hit 3,000 subscribers on this channel. So thank you, everyone, for always being there, and always asking great questions, and listening to us. If you've not done so, please do hit that subscribe button and you won't miss any of the next market commentaries when they go out. So you get a notification every time. So please do hit the subscribe button so you get more of our market commentary. Freddy, that's a good milestone, right?
00:52 | Freddy
It's a good start. Let's go for another zero.
00:55 | Philipp
Exactly. I'm with you. But we do have a lot to discuss. Obviously, you know, the pinnacle of all the political talk from last year, over the last year, year and a half, almost, right? The end of a presidential era is coming up on us today as we are recording this on a Wednesday, we will have the inauguration of Joe Biden. What do you see happening? Any updates you want to give us in relation to that?
01:25 | Freddy
Well, the inauguration, as in all other inaugurations in the past, is a ceremony, it signals the end of an era and this one is particularly more meaningful than in the past because of all the chaos that we have seen in the last 4 years. So, I think for international investors, it's a sign of relief to welcome a less mercurial president of the United States. I think the European Union would be very happy as well because the US under Biden is already signalling a desire to return to the Paris Accord for climate change. So there's just a lot of, it's not excitement, but just a lot of relief.
02:12 | Philipp
Yeah, no, absolutely, and I think hopefully we'll see the US from their best side again over the next 4 years. With that being said, the first few positions in Joe Biden's new cabinet are going through Senate hearings already, right? Yesterday, on Tuesday, this week, we had Janet Yellen's confirmation hearing. And it's obviously a very important one when it comes to the financial world. What did you get out of that hearing? Where do you think she stands? Was the market surprised or is everything just as you expected?
02:52 | Freddy
Firstly, maybe some of us may not know who Janet Yellen is, but I was super relieved that she was the chosen one because she has great central banking experience. She used to be the head governor for the Fed and she's also been, for many years, managing monetary policies in the US. And she understood the difference between monetary policy and foreign exchange intervention. So although in the speech she somewhat started with a sense that the US should remain firm on China's trade practices, the US will continue to see China as a strategic competitor. But for people who knew her during her central banking years, we know that she knows the difference between intervening in a currency as a manipulator or as a central banking policy. So that, actually, you've got to read between the lines. So for someone like myself who's watched her before, I feel like investors should not listen too literally to her speech. She is a very level-headed person.
04:08 | Philipp
Yeah. And that will hopefully help the markets as well. Another topic we wanted to discuss, because it's been coming up to us quite a bit, right? I think you've got a lot of questions about it. I always get questions about it. We already had some questions during the last few market commentaries about it. People were worried about, you know, Alibaba when Jack Ma kind of like, fell off the face of the Earth, so to speak, for a little bit. And obviously, we have KWEB as an ETF, which also holds Alibaba as a company. So there's always that questioning, hey, what happens now to Alibaba if Jack Ma is just gone, but you have some news, right?
04:51 | Freddy
Well, he reappeared giving a speech/video presentation to teachers in the rural areas, so it's almost like a congregation of rural teachers. He was a teacher himself before. So he's doing very philanthropic stuff during the conference and mentioned that himself and as a firm, they're just going to focus more on philanthropy and education. It’s a far cry from the previous ambition, of course. So, you can read between the lines. But it didn't matter really for StashAway, because even when it was down about 20 percentage points from 30 September to even the beginning of this year, and KWEB, the ETF that we have invested about 9+% in Alibaba, it went down to 7.5% of that ETF being in it. Just because it dropped it didn't matter because the KWEB was up 16% in the same period while Alibaba was down 20%. So, again, I just wanted to demonstrate the power of intelligent diversification. And this is a pretty classic example.
06:09 | Philipp
And it really shows that diversification, not just, this is just in one ETF, but also in your portfolio when you have multiple ETFs.
06:19 | Freddy
We have a lot more ETFs and asset classes across all the portfolios. And this is even smaller than that for the impact on the one ETF, for sure.
Yeah, exactly. Well Freddy, then let's wrap up the market news and go into questions, because we did get a couple of questions from last week and we want to touch on those. For anyone that's new, if you want to ask any questions to Freddy and myself, please feel free to always put them in the comments section below. If you listen to us as a podcast, feel free to send us a message to firstname.lastname@example.org. Freddy, first question, Ian Wong, he says, "I'm new to investments and StashAway." So, first of all, thank you for joining us. We really appreciate it.
06:51 | Freddy
06:52 | Philipp
The person, he said, "I'm not even sure how to ask questions regarding investments, but let me try. I'm comfortable with the StashAway risk, it fits my risk level. My question, though, is, have you ever considered flexible allocation between China and US equities in general or high-risk index?".
07:11 | Freddy
Well, first of all, thanks for trying, Ian, and there's no such thing as a dumb question because all questions are, if it's a concern to you as an investor, it is a legitimate question. So, thank you for trying. Firstly, yes, just as an intro, StashAway's algorithm actually looks at a lot of ETFs, beyond what you are investing in your account. There's a universe of ETFs that we look at, that the algorithm ERAA® would choose from. So, it would flexibly move in and out of certain things, not based on the whims and fancies of me, but based on the signals that we get in the algorithm based on economic trends, economic data, based on the valuation of asset classes versus the fair value. All dimensions of information are being considered by the algorithm that's very difficult for a human being to process, but only the machine can optimise it. So it is flexible, and yes, we do have higher-risk portfolios. As you know, we call our risk level the StashAway Risk Index. Anything more than 22% is in the high-risk category. We have the highest risk at 36% SRI, which means that is a 1% chance of losing 36% of the money. This is still a lot safer than the standard equities market and it does return at a better profile. But again, we call that a high risk portfolio, it is there. But again, I will caution going to the high-risk index without proper financial planning first. But it is available on our platform.
08:49 | Philipp
Yeah, and Ian, especially also in the future, you mentioned you're new to the investment scene and stuff, I think maybe start off with some of the lower ones that you're probably already at right now. Freddy, next question. Ridz M is asking, "Hi StashAway. When do you think the data will start to show specific trends to move out of the all-weather strategy you've mentioned before, the second half of 2021 or even later than that?".
09:15 | Freddy
Well, as usual, thank you, Ridz M, it's always great receiving your questions and thank you for participating. We are seeing improvement in economic data, so it's dictated by economic data, the rate of change, it's not dictated by human beings. In terms of me interpreting the signals that we see now, things are improving a lot, but it's sort of a situation of becoming less and less negative than before, it's not actually growing. And so we had this weird period in 2021 where we're waiting for the vaccines to be shot in our arms. There's still this period where we need to manage the mutation, the current wave of infections. We also need to have more government support to tide things over until we really get to the finish line. So again, this is what the data is saying, and risk management should always be preemptive rather than reactive. So, we remain in an all-weather strategy until the data tells us otherwise.
10:19 | Philipp
Great, for everyone else, that's it with questions for today, but we do have a few upcoming webinars, as always, over the next few weeks. And what we have planned for next week is actually 3 different ones, for the 3 different regions we're in right now. For Singapore, if you want to join us to learn more about our Income portfolio, we have an Ask Me Anything session on Thursday, 28 January from 7pm to 8.30pm. Again, the link is in the description below as well as on our website. In Malaysia, we have a live webinar on Investing Basics. So, if you want to learn more about investments and how to structure your portfolios, you can join us on Wednesday, 27 January from 6pm to 7pm. Again, the link is below as well as on our website. And for our MENA region, StashAway MENA: Ask Me Anything. So, if you have any questions ever about StashAway, you want to learn about how we custody assets, how we invest, how the app works, anything is possible. Join us also on the 27 January, 6pm to 7pm, Gulf Standard Time. Again, descriptions are in the show notes that have the links as well as on our website to sign up for this. And we hope to see a lot of you on all those three webinars and ask away with any questions during that time. And if not again, also put them in the comments section below this video or send us an email to email@example.com so that we can pick those up and Freddy will happily answer them over the next couple of weeks. Other than that, I'm sure we'll be with you again in a week's time. Freddy, until then.
11:58 | Freddy
To next week.
11:59 | Philipp