Global Equity Strategy 4Q 2018


Key Takeaways

  • Global equity markets faced significant pressure as volatility escalated in the fourth quarter. The MSCI All Country World Index (ACWI) declined 12.75%, bringing the index’s year-to-date return from moderately positive at the beginning of the quarter into decisively negative territory for 2018. While our Global Equity strategy was also negative in the fourth quarter and the full year, it outperformed the MSCI ACWI for both periods.
  • In the fourth quarter and for the year, the financials sector was the most significant driver of our relative returns, helped by our core Indian financials. Consistent with our quality growth investment style, we avoided exposure to highly cyclical areas, such as energy, which was a relative headwind for most of the year. However, we benefited from the sharp decline in oil prices in the fourth quarter. Avoiding frontier markets and U.S. capital markets also worked in our favor.
  • Macro concerns shaking the markets include the trade and geopolitical confrontation between the U.S. and China, uncertainty around Brexit, and the volatile oil price – but the core issue has been rising rates in the U.S. As rates climb, the hand that had squeezed savings out of safe developed market assets towards higher growth is now releasing its grip. As liquidity flows back, it will not only raise the price of risk, but make funding difficult in some riskier areas.
  • With unrelenting discipline, we remain sharply focused on bottom-up research in pursuit of stable, quality growth companies at reasonable prices. Importantly, the long-term earnings outlook for our portfolio companies, which ultimately determines the trajectory of stock prices, is intact. Despite the doom and gloom among investors, we are starting 2019 on an optimistic note.

Trailing Returns: Global Markets Equity Composite(As of 12.31.2018)

Calendar Year Returns

Source: NorthernTrust
All results portrayed are expressed in U.S. dollars. Periods under one year are not annualized.
Past performance is not necessarily indicative of future results. For full disclosure and for further information regarding comparison to an index, see the Disclaimer and Performance Disclosure.

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