Quarterly Commentaries

International Equity Strategy 1Q 2018


Key Takeaways

  • In the first quarter, the MSCI All Country World ex U.S. Index returned a mild -1.18%, masking a volatile period with performance ranging from a high of 7.09% to a low of -2.75%. The Vontobel International Equity strategy return of -2.34% lagged the market, although consistent with the quality growth portfolio, it traded in a tighter range.
  • Consumer staples companies sold off in a rotation away from ‘bond proxy’ stocks. Given our overweight to staples, this alone was enough to account for the underperformance in the quarter. IT stocks continued to outperform, and our significant overweight to this sector helped balance the overall result.
  • While economies around the world look strong on the surface and we have seen relatively synchronized growth, we also see clouds on the horizon, including trade renegotiations, normalization of monetary policy, and politics in many countries reflecting a rise in nationalism and anti-globalization.
  • On the back of higher valuations, we decreased our exposure to consumer staples from 41% at year-end 2016 to 25% at first quarter-end 2018. We have found opportunities in industrial, health care and consumer discretionary companies.
  • The timing of potential risks manifesting in the economy is unclear. But in those times, we see our high-quality companies really shine. While low-quality cyclical companies’ earnings could collapse, ours should show much less earnings volatility. We believe this earnings protection should lead to performance downside protection.

Trailing Returns: International Equity Composite(As of 03.31.2018)

Calendar Year Returns

Source: NorthernTrust

All results portrayed are expressed in U.S. dollars.
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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