Quarterly Commentaries

International Equity Strategy 3Q 2018

10.16.2018

Key Takeaways

 
  • In the third quarter of 2018, our International Equity strategy underperformed the MSCI All Country World Index ex-U.S., which returned 0.71%. Our strategy has outperformed the benchmark on a one-, five- and 10-year basis.
  • European equities turned in a lackluster performance for the third quarter, as the region faced risks stemming from Italy’s budget deal and Brexit negotiations. Emerging markets (EM) remained under pressure. Global trade frictions, a rising U.S. dollar, tighter Federal Reserve monetary policy and higher oil prices drove assets away from riskier countries. Many EM currencies sold off, with Turkey, Argentina and South Africa among the hardest hit.
  • The strategy’s relative performance was aided by our holdings in the information technology and consumer staples sectors. This was offset by weakness in our financials and consumer discretionary holdings.
  • Global GDP growth continues to show momentum, but there are reasons for concern. With the U.S. economy working close to full capacity, the Federal Reserve is implementing a series of rate increases to contain inflationary pressures. Despite rising inflation, the Trump administration pushed forward three populist measures that will add more fuel to the fire — tax cuts, higher import tariffs and a curb on immigration. Meanwhile, there is uncertainty in Europe, evident in growing political instability and diverging economic health among countries. And in emerging markets, we see fear in some areas leading to lower valuation multiples on quality companies despite expectations for continued earnings growth.
  • Quality growth companies, especially those that are less sensitive to GDP growth, can help protect investors in a downturn, as has been the case historically. We have sought to invest patiently and consistently in quality growth companies for more than 20 years, and do not plan to alter our approach. Our goal is to maintain a portfolio of companies with robust underlying earnings that can participate in market upside, but also offer strong downside protection during times of economic difficulty.

Trailing Returns: International Equity Composite(As of 09.30.2018)

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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