Welcome to the 14th edition of Perspectives.

Equity volatility returned with a vengeance in the first quarter of 2018. With twelve moves of plus or minus two percent in the S&P 500 year-to-date compared with a total of zero last year, it seems apparent that more than a few investors have become nervous since the broad index reached an all-time high on January 26th. While there have been a variety of reasons for global equity investors to start to worry about the sustainability of the “Trump bull market” (increasing trade tensions, Facebook’s woes, the rise in LIBOR, etc.), the sentiment that valuation levels are exaggerated and the growth of passive investing (with the resulting over-reliance on market-cap weighted indices) are also cited among the culprits behind the recent market correction. In the first part of this edition, we review in details what we consider to be the “Ten stories to remember” from the first three months of the year.

Looking at the second quarter (and beyond), the very good news is that this new market context is creating great opportunities in terms of tactical asset allocation and security selection. There are indeed pockets of relative value, especially in markets for which valuation have not been too much driven by the trend towards index “hugging”. This is the case within Emerging Markets and Middle East equities in particular. Our flagship Al Mal Mena equities funds posted one of its best quarters ever with a gain of 12%. Going forward, we believe there are indeed some attractive alpha and beta opportunities to be exploited in our regional markets, a topic we dig in further in the second part of Perspectives.

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