THE INVESTOR CENTRE
THE INVESTOR
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27
E
quity markets have embarked upon
another bout of strength, yet again
prompted by vanishing bond yields.The
latest spell of European quantitative easing
was initiated at a time when there were
some tentative signs of economic growth,
and the stimulus of a lower oil price had yet
to make its presence felt.Added to that has
been the competitive boost from the fall in
the euro.Were this nascent momentum to
continue, then bond yields might begin to
reverse.While the magnitude of this reversal
might be slight, it would be enough to stall
the rally in‘bond-like equities’, which are
already expensive on a fundamental basis.
However, from a long-term perspective,
we would rather have some growth to drive
the performance of equities rather than
the compulsion of yield scarcity, which is
the key factor at the moment.The early
part of the year saw us reduce our oil and
resource weighting from‘low’ to‘quite
low’.We magnanimously decided to give
GlaxoSmithKline another chance and rebuilt
the weighting. On the international list, we
took our gains in Deutsche Post, Energa
(Polish utility) and Sano . New holdings
were Enagas (Spanish utility) and Eltel
(Nordic infrastructure service company).
I
n January, investors were faced with
volatility across global markets, currencies
and commodities. Stocks rallied globally in
February, with most broad indices hitting
fresh all-time highs. US stocks slightly
outperformed global, but were trumped by
eurozone stocks as investors anticipated the
start of the ECB’s planned €1 trillion QE
programme in March and Greece reached
yet another deal with its creditors. Several
of our holdings reported solid results during
the quarter, includingTesco and ING Groep.
Tesco reported results for the critical
Christmas trading season, exceeding low
expectations. ING Groep shares increased
after announcing a reinstatement of its
dividend.Among those holdings detracting
from results wereAmerican Express and
Royal Bank of Scotland (RBS). Shares
of American Express declined after the
company announced that its agreement
with retailer Costco US would end in 2016.
We opened a position in ElectronicArts, an
interactive entertainment software company,
and fully exited Unilever as it reached our
estimate of intrinsic value.
T
he year started well, with all equity
markets strong during January and
February.The long-awaited European QE
programme was bigger than expected
and the bailout package for Greece was
extended by four months.A cease re was
agreed in Ukraine and seems to be holding.
More recently, strong jobs data in the US
suggested interest rates may rise there as
soon as June, triggering pro t-taking in
bonds and equities.We made no signi cant
changes to asset allocation, but did add
modestly to Japan in February.We expect
the Abe administration to continue with
its pro-growth and pro-business policies
in 2015.The resulting weakness of the
yen should lead to faster growth and
be bene cial for equity prices.We have
continued to hold more cash than usual
and less in government bonds. In the UK,
the political temperature continues to
rise with no party expected to have an
overall majority on 7 May. Such a result is
unlikely to be too damaging to UK equities,
given their high percentage of overseas
earnings. Equities are not obviously cheap,
based on history, but still look relatively
attractive compared with government
bonds and cash.
ARTEMIS
UK & International Income
Growth to drive equity performance
is better for the long term
ARTISAN PARTNERS
Global Managed
Global
Indices hit all-time highs, with US and
eurozone stocks setting the pace
AXA FRAMLINGTON
AXA Framlington Managed
Balanced Managed
Uncertain UK election unlikely to
be too damaging for equities
The earlypart of the
year sawus reduce oil
and resourceweighting
Greece reachedyet
another deal with
its creditors
Strong jobs data in the
US suggested interest
ratesmay rise
Adrian Gosden and Adrian Frost
Dan O’Keefe, David Samra and
James Hamel
Richard Peirson
