The Gordon House Optimal Fund says it ended February flat, compared to European stock markets which on the whole closed down; the DJ Stoxx Pan-Europe Index ended -3.2% and the Dow Jones -3.7%. Uncertainty over the outbreak of war with Iraq dominated sentiment in February. Despite all the background noise, the question is not whether war will be waged but under what circumstances and when.
The fund blames uncertainty over war in Iraq and a steady flow of depressing news from financials, manufacturers and airlines. “However,” it says, “the technology sector, after taking the biggest reality check at the start of this bear market, is currently the most resilient.”
The fund also warns that the dollar is on the wane. “The US needs 7% of the world’s savings just to fund the twin deficits of government and trade,” it says. “This situation was tenable when the dollar was perceived as a safe haven for storing wealth and foreign exchange reserves but now this perception is changing. The good news is that US companies will benefit from being more competitive internationally and that will eventually feed into stock prices, in the long term. However, in the short term, it is particularly difficult to make an informed strategy call at the moment for obvious reasons; the variables are too great and too prolific. The fund is very unlikely to take a significant directional view whilst waiting for events to unfold. For the moment cash is king.”