10th Mar 2022 16:21
(Alliance News) - With a strong domestic oil industry and the ability to ramp up shale production, the US is unlikely to suffer the same energy price inflation as Europe. This could lead to a "return to US exceptionalism" in terms of economic performance, Ruffer Investment Co Ltd commented on Thursday.
"This would put upward pressure on the dollar, which in turn sucks liquidity out of broader financial markets (as well as making the Fed's life more difficult)," Ruffer said. "This is likely to increase stress in markets more generally, hence our desire not to be overextended in either direction."
The Guernsey-incorporated closed-end fund was providing a monthly update for February. It said net asset value rose by 2.6% during the month, compared with a 0.4% decline for the FTSE All-Share index. NAV is up 11% over the past year.
Ruffer said it has benefited from increasing its exposure to gold to 8% from 6% late in 2021, having expected a period of dollar weakness. "While we were wrong about dollar weakness, gold has undoubtedly benefited from safe-haven demand" following Russia's invasion of Ukraine. The metal's price is up 10% so far in 2022.
Ruffer said it has no direct exposure to Russia or Ukraine. It has a 1.8% position in oil major BP PLC, but it noted that BP's share price has so far not been damaged by the company's decision to divest of its 20% stake in Russian oil producer Rosneft. BP shares are up 3.3% so far in 2022.
"Energy stocks have performed well for us," Ruffer said. "They have been a significant equity allocation since the beginning of the market recovery from the Covid crisis. Our view that global demand would remain robust and supply would be constrained is playing out."
Ruffer's biggest single equity holding, at 2.6% of the fund, is Shell PLC.
By Tom Waite; [email protected]
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