Quarterly Commentaries

Global Equity Strategy 2Q 2018


Key Takeaways

  • In the second quarter of 2018, our Global Equity strategy outperformed the MSCI All Country World Index. The benchmark eked out a small gain, but the quarter was marked by a shift to risk-off in a number of markets. While most major economies continued to post healthy GDP figures, the U.S. took center stage and shook the status quo. Hearty U.S. growth has finally led to a tight labor market and rising inflation, so the significant debt-fueled tax cut and increased budget deficit could easily be viewed as pouring gasoline on a fire.
  • Emerging markets (EM) were hit hard in the quarter – the MSCI EM index fell 8% in U.S. dollar terms. Harder-hit EM currencies included the Brazilian real and the South African rand, both of which fell 14% against the U.S. dollar, lifting the costs of global commodities such as oil in local terms in these economies.
  • The portfolio’s positive absolute performance in the quarter was driven by our U.S. exposure, particularly to consumer discretionary and IT holdings. These more than offset weakness from our higher-yielding consumer staples holdings. Lack of exposure to the strong (and in our view unpredictable) energy sector weighed against relative returns.
  • Amid falling visibility, resilience at both the company and investment levels becomes increasingly important. We reiterate our evergreen view that fulfilling the promise of quality growth investments requires style consistency and patience through the cycle. We maintain an overweight to consumer staples and staple-like growth companies, which have typically performed well through difficult economic conditions.
  • We remain alert to new investment opportunities. In our view, the advantage for quality growth investors is that quality franchises do not change shape or bleed cash when facing a slowdown or rising debt costs.

Trailing Returns: Global Markets Equity Composite(As of 06.30.2018)

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.

Gain insight. Stay informed.

Get access to our investment portal.