Quarterly Commentaries

U.S. Equity Strategy 1Q 2018


Key Takeaways

  • In the first quarter, the S&P 500 Index returned –.76%, masking a volatile period with performance ranging from a high of 7.52% to a low of –3.36%. The Vontobel U.S. Equity strategy return of .21% slightly outperformed the market. Over the past 12 months, the 17.39% return from the portfolio is ahead of the benchmark by 3.40%.
  • IT stocks continued to outperform, and our stock selection in the sector was the leading driver of absolute returns. Our consumer discretionary holdings contributed to both absolute and relative returns. Consumer staples were notable underperformers in the Index as the market rotated away from stable and higher dividend yield areas; our overweight to the sector, combined with a few laggards, represented the largest drag on both relative and absolute returns.
  • The U.S. economy, which has grown at a moderate rate since the 2008-09 crisis, is now finally heating up as unemployment reaches cyclical lows and the government has just passed a tax cut and a massive increase in budgeted spending. If inflation takes grip, interest rates could rise quicker and higher than expected.
  • The negotiations to rebalance trade flows between China and the U.S. have introduced uncertainty for companies with export operations in China. We have little direct exposure to this risk within the portfolio. We think both sides realize a pragmatic deal is the best outcome - but change brings unpredictability.
  • While we are bottom-up investors, we also stay on top of evolving macro trends that could impact valuations, rising interest rates or future demand for our investment companies, such as a trade war. We anticipate that as uncertainty and rates rise, the problems of companies with weaker fundamentals will start to become more apparent. In this environment, we remain convinced that investing in quality growth companies, which tend to have a low “downside capture” over time because of their stronger businesses, continues to make sense for investors with long term and absolute return objectives.

Trailing Returns: U.S. 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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