The Investor 89

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28 | THE INVESTOR
THE INVESTOR CENTRE
T he macroeconomic conditions
precipitating a global slowdown
will continue toweigh heavily on equity
markets worldwide. Notably, sluggish
Chinese growth, commodity prices
and concerns that the banking sector
may bear the brunt of a fallout from
stimulus measures and untested
negative interest rate decisions.
There is growing scepticism about
howmuch ammunition central
bankers in Europe and in commodities-
importing emerging markets have left
to tackle deflationary trends. It remains
to be seen howwell governments can
coordinate fiscal policy and structural
reform to remedy the situation.The
US Federal Reserve is expected to
raise rates slower than planned,which
has boosted emerging market
currencies but raises concerns about
the impact of global risks on the US.
The National People’s Congress
cemented China’s commitment to
easing the economy towards services
and innovation, but Beijing will likely
face resistance in the coal and steel
sectors it wants to reform.A potential
Brexit and political turmoil in Brazil
may have spill-over effects elsewhere.
We continue to pursue companies
that can weather the storms.
Fears of recession in the wake of
poor economic reports in
December and slowing growth in
China sparked a global stock market
sell-off at the start of the year. But
conditions improved, stoking
speculation concerning the timing of
the next Fed rate move.
With that as a backdrop,US markets
were basically flat for the quarter,
outperforming many international
markets.The leading economic sector
was utilities,which tend to do well
during uncertainty.Conversely,with
the prospects of the next Fed rate
increase pushed back, financials was
the worst-performing sector.
The fund slightly underperformed
in the quarter.The majority of the
underperformance came from the
consumer staples sector.While our
consumer staples holdings performed
well last year, as the market dropped in
January, so did a positive
note, our utilities holdings,while
lagging for most of last year, have led
the performance pack in 2016.
While we expect the US markets
to remain a bit more volatile,we
are comfortable with long-term
fundamentals.
ABERDEEN ASIA
Far East
Market fluctuations will provide an
opportunity to buy good value stocks
ARISTOTLE
NORTH AMERICAN
Utilities performed well as staples
slipped back in line with the market
ABERDEEN
Ethical
Focus on companies that can weather
volatile conditions in the long term
Challenging conditions
persist as Japanmoves
tonegative interest rates
Improving conditions
stoked speculation
over next rate rise
The global slowdown
will continue to affect
equitymarkets
Jamie Cumming Hugh Young Howard Gleicher
T he short-term outlook remains
challenging.The global sell-off in
the first fewweeks of 2016 seemed to
reflect this view. Risk-aversion spiked
after Japan followed other central
banks in Europe by cutting its main
interest rate even further below zero,
triggering fears that policymakers have
run out of options. In commodity
markets, global demand for oil is still
anaemic and gold is back in favour.
China remains the focus of anxiety.
Beijing’s string of policy missteps
has stoked concerns over the
government’s ability to manage the
economic slowdown as it transitions to
a consumer-driven model. In Japan,
monetary policy has proved unpopular
at home (the yen has strengthened and
the stock market declined). Inflation
remains well below the Bank of Japan’s
2% target, highlighting the challenge
the central bank faces.
Growth uncertainty in the US keeps
the debate lively on whether there will
be further rate hikes in the year ahead.
All this will generate sharpmovements
in the market. But this will also
present us with opportunities to invest
in good-quality stocks at attractive
valuations, particularly those that have
been sold off indiscriminately.
All information correct as at 31 March 2016