U
ntil recently the market background
has been pretty unhelpful, with
pockets of growth in the US and UK being
outweighed by stagnation in Europe.Added
to this uncertain mix was an above-average
period of political uncertainty, given
Ukraine, the Middle East, the Scottish
independence vote and the forthcoming
general election. In the UK, November saw
markedly lower oil prices and continued
weakness in most commodities.The market
has rightly judged that this is the rst good
news for the consumer for a number of
years. For the UK stock market, however,
the e ect was muted by the signi cant oil
and resource weighting. During the quarter
we added some new names to the portfolio.
Ashmore is an asset manager specialising
in emerging market debt – not a short-
term call. Entra is a Norwegian property
company and InsuranceAustralia is as
described. In the US we bought General
Electric. Looking ahead, there is much
discussion about the raising of interest rates.
To our mind, much of this discussion is of
little consequence because it is unlikely
to be a‘hike’ and rather a baby step. More
important, it would be a sign that economies
are healthy and have regained a degree of
self-su ciency rather than relying on the
sugar-rush of government stimulus.
G
lobal markets advanced in October
and November as investors cheered
moves by key central banks to add liquidity
in a bid to shore up agging economies.
US stocks led as the US economy showed
signs of strength and corporate earnings
growth has been healthy. Several of our
holdings reported solid results during the
quarter, including Chubb Corp. Quarterly
results showed the rm produced record
quarterly operating income per share.
Strong underwriting performance also aided
corporate results.Applied Materials was
another top performer as the rm continued
making progress on itsTokyo Electron
merger.Among those holdings detracting
from results wereWeir Group and Rotork.
Both of these energy-exposed rms were
pressured by falling oil prices, particularly
late in November when OPEC announced
it would not curb production.We opened
a position inAmorePaci c, a leading South
Korean cosmetics and skincare company.
We fully exitedAmazon, in favour of other
opportunities, andAramark as it reached
our estimate of intrinsic value.
T
he global growth background during
the nal quarter of 2014 was like
much of the past year: stronger than
expected in the US and UK but weaker
in Europe, Japan and China.Tapering of
US quantitative easing (QE) nally ended,
but Japan recently increased signi cantly
the extent of its intervention; while in
Europe, the European Central Bank looks
to be moving towards some form of QE.
Demand for commodities was weak,
with a recent glut of oil forcing down
its price and that of shares susceptible
to it. Geopolitical concerns have been
numerous: Ukraine, Iraq, Syria, an Ebola
outbreak inWest Africa and a possible
return to the ColdWar. UK equities have
performed relatively poorly this year,
re ecting domestic political concerns
as well as a high weighting to resources
and banking. US equities have been the
strongest area, re ecting strong domestic
growth and the bene t of a strong dollar.
Paci c ex Japan and emerging markets
also did well as investors recognised cheap
valuations and responded to stimulus
measures from Japan and China.We
continued to hold more cash than usual as
we see little value in government bonds,
though this strategy has not worked well
this year as bond yields have continued
to fall.We see better value in equities but
earnings forecasts will need to be achieved
for equities to make progress in 2015.
Adrian Gosden and Adrian Frost
Dan O’Keefe and David Samra
Richard Peirson
THE INVESTOR CENTRE
THE INVESTOR
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27
ARTEMIS
UK & International Income
Baby-step increase would be a sign
of a return to self-sufficiency
ARTISAN PARTNERS
Global Managed
Global
Solid results from holdings as US
economy showed signs of strength
AXA FRAMLINGTON
AXA Framlington Managed
Balanced Managed
Numerous geopolitical concerns as US
and UK continue strong growth
There ismuch
discussion about the
raising of interest rates
Investors cheered
moves by key central
banks to add liquidity
The ECB looks to
bemoving to some
formof QE
A
Dan O’Keefe, David Samra and
James Hamel
R
