T
he UK remains one of the faster-
expanding economies in the G7.
Growth has slowed somewhat in recent
months, but indicators still re ect solid
expansionary levels overall.The UK labour
market has continued to heal, though
improvements in wage levels are yet to
be seen.The global expansion is currently
being led by the US, albeit at a slower pace
than many originally expected. Middle
East tensions, a stagnant eurozone and the
Russia/Ukraine con ict all pose risks to the
improving outlook. Central bank policies
should begin to diverge, with the US and
UK considering tightening, while the
European Central Bank and Bank of Japan
are taking more accommodative stances.
UK investment grade (IG) bonds posted
solid returns for the quarter, though
performance relative to gilts has been
lacklustre and corporate spreads have
widened, similar to those in the US dollar
market. However, the UK IG market has
outperformed gilts in the year to date,
largely due to the rally throughout the rst
half of the year. Fundamentals continue to
be supportive of global credit, but signs of
deterioration have surfaced in some areas,
notably the oil and energy spaces.The price
for UK gilts in 2014 has generally been
high, which has been positive in terms of
performance for the fund.The 10-year
gilt is at lows for the year, and levels last
experienced in the summer months of 2013.
LOOMIS SAYLES
Investment Grade Corporate Bond
UK investment grade bonds posted
solid returns for the quarter
The global expansion
is currentlybeing led
by theUS
THE INVESTOR CENTRE
THE INVESTOR
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33
G
lobal equity markets initially su ered
declines in the nal quarter of 2014
as investors fretted over slowing global
growth rates (led by weakness in Europe)
and disin ationary pressures exacerbated
by falling oil prices. However, later in the
period, markets were led higher by positive
US economic data (in particular, strong
employment numbers) and a number of
supportive central bank policy actions.The
US Federal Reserve ended its quantitative
easing programme as expected, although
the minutes of the Federal Open Market
Committee’s meetings revealed that it had
lowered its medium-term projection for US
economic growth due to the carry-through
e ects of economic weakness in Europe,
Japan and China. Despite this, it also noted
that market expectations of the federal
funds rate lift-o date are increasingly
dovish, which may increase risks to asset
prices should lift-o come earlier than
expected.Against this backdrop, a number
of US consumer-related companies were
among the strategy’s top contributors.
Lowe’s,Target andWal-Mart all bene ted
from stronger store tra c trends, driven
by macroeconomic tailwinds. Sano
was the strategy’s largest detractor after
unexpectedly announcing that pricing
pressure on its Lantus diabetes treatment
would cause sales growth to be lower than
expected in 2015.
MAGELLAN
International Equity
US consumer-related companies
among strategy’s top contributors
Marketswere led
higher bypositive
US economic data
Kenneth M. Buntrock
D
uring the summer months, the oil
price remained subdued despite a
period of unrest; and over the past couple
of months we have watched as the oil price
has continued to fall further, hitting its
lowest level since mid-2010. In our mind
this is good news for the consumer, who
will e ectively bene t from a tax cut.
Consequently, we believe that consumers
will be more willing to loosen their purse
strings; and so we have re ected this in
our portfolio by adding to stocks that
will bene t from a rebound in consumer
spending – Marks & Spencer, Carnival
and Ryanair all did well over the period.
We are cautiously optimistic for equity
markets over the next 12 months, although
there remain a number of signi cant
risks that need to be watched closely.As
discussed, the collapse in the oil price will
provide a huge, positive tailwind for the
developed market consumer, especially in
Japan and Europe, which are big importers
of energy. Despite the positive hum for the
near term we are also aware of potentially
signi cant risks, predominately related to
China and other emerging markets.We
continue to remain exible, reading the
macro runes carefully and picking stocks
that we believe will perform well in the
prevailing market environment.
MAJEDIE
UK Growth
Joint manager: UK & General Progressive
Stocks added to portfolio that will
benefit from rebound in spending
Consumerswill be
morewilling to loosen
their purse strings
Richard Staveley, Adam Parker, James de
Uphaugh, Matthew Smith and Chris Field
Hamish Douglass
