The global economy continues to expand, with the recovery in Europe now looking particularly impressive. This is supported by solid growth in corporate earnings, and equity market sentiment remains buoyant.
We have seen moments of unease as the war of words between the US and North Korea continues, supporting safe havens, but stockmarkets have generally made further gains over the last quarter. Our portfolios have been well positioned and have participated in this growth.
International diversification can be a two-edged sword. Last year, the Pound fell and overseas holdings supported the portfolio. More recently, we have focused on the possibility of the Pound rebounding as events force the government to soften its approach to Brexit; this shift seems to be underway. While global stockmarkets rose in local currency terms over the quarter, the Pound’s rise has offset this. It has been a drag for UK equities too, causing company profits to be worth less in Sterling terms. Our portfolios aim to mitigate currency volatility as far as possible by being globally diversified.
Markets are preparing for a new era, with more economies seeing an end to central bank emergency measures. The US will continue to raise interest rates; in Europe, the ECB wants to reduce purchases of government bonds, and in the UK the chances of an interest rate rise are increasing. Markets can still thrive as policy tightens, but only if economic growth is strong enough. In our view, equities remain attractive in comparison with other asset classes, but the last 3 months of 2017 are likely to see continuing volatility against a backdrop of geo-political issues and a renewed focus on central banks. We are confident that our diversified and proactive approach will maximise the opportunities in the market.
Please note, our Investment Commentary is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch.