- Global equity markets posted gains for the first quarter of 2017. A recovery in many areas that sold off in the fourth quarter of 2016, including the Information Technology and Consumer Staples sectors, and a number of emerging markets supported our Global Equity Strategy’s relative outperformance.
- A euphoric environment in the U.S. has been partly driven by investors’ hopes around U.S. policy initiatives – regulatory rollback, tax reform and infrastructure spending. We are mindful that the timing or outcomes of tax policy and infrastructure spending may not meet optimistic expectations. However, we feel the U.S. economy is on sound footing and the tightening labor market supportive of wage rises and consumer spending.
- Investors stayed optimistic about Europe given positive economic data, particularly from Germany and Spain. For now, we remain cautious on certain exposures within France and Italy which both have elections on the horizon. A swing at the ballot box followed by an exit from the euro, or less likely but potentially much worse the EU, could damage the growth prospects for some companies, banks in particular, operating in these markets.
- Emerging market equities posted double-digit returns, driven by Technology, Chinese banks and India – where the market was relieved that the demonetization impact on corporate earnings has been less severe than feared.
- We are confident about the long-term prospects for our holdings – including Consumer Staples that were hard hit towards the end of 2016, but recovered following an audacious and rejected bid for Unilever that worked as a reminder of the great value quality companies hold, which can be forgotten by the markets from time to time.
- aim to deliver on a consistent promise of returns driven by stable and predictable earnings growth over many years. Due to the long-term nature of our approach and the ability for earnings to compound for decades, valuation is not the primary driver of returns. However, we exercise a strict valuation discipline which is important at times like this, when the corporate earnings and growth outlook appears healthy and investors can be tempted to switch into lower quality but cyclical earnings.