Quarterly Commentaries

International Equity Strategy 3Q 2017


Key Takeaways

  • In the third quarter of 2017, our International Equity Strategy delivered solid returns, but underperformed the strong performance of the MSCI All Country World ex U.S. Index – consistent with our quality growth investment style.
  • Across the benchmark, almost all equity markets registered positive returns for the quarter. The broad macro backdrop is reasonably steady with wage growth, inflation, household leverage and housing markets at reasonable levels in most major economies, supported by low interest rates and energy prices. This stable backdrop is certainly good enough for companies with structural growth drivers to continue growing earnings and adding value for shareholders.
  • Our International Equity Strategy’s absolute returns were driven primarily by our holdings in the Information Technology sector, our Indian Financials holdings, as well as a lift for dollar investors from the weaker U.S. dollar. However, in market relative terms, performance was pulled back by our Consumer Staples and Consumer Discretionary holdings, as well as our lack of exposure to Energy and Materials, both of which enjoyed a strong quarter.
  • Recent market strength has been accompanied by market volatility close to all-time lows. While, at the same time, geopolitical headline risk is arguably quite high. We see a number of risks that could alter sentiment, including rising rates, monetary policy normalization in Europe, repercussions of Brexit negotiations, or a slide towards a U.S./China trade war – alongside elevated valuations. But, while the global outlook doesn’t suggest particularly booming economies, it’s steady enough, and we continue to find a fair number of quality businesses we believe are well-placed to weather an economic shock should one occur, and continue to benefit from secular growth through stable periods.

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