Globally, government bond yields have remained incredibly low, despite the cyclical pick-up we have seen in economic growth in recent times. Nowhere is this more evident than the Eurozone, which continues to post strong economic data. We believe bond markets need to catch up with the fundamental reality.
The impact that Brexit will have on asset prices remains unknown. At present, it appears that neither the credit nor the equity market are concerned, with regard to financials. Global economic growth remains robust and we forecast a relatively benign operating environment for companies in the UK and the Eurozone. But where are we finding attractive opportunities within the financials space?
It is normal to be seduced by headline performance figures in an attempt to judge fund quality. Typically, the industry focuses on cumulative three and five year performance figures when screening funds for selection. However, we believe there is a different way to assess processes and outcomes, the persistency of returns.
Compared to previous decades, it is fair to say that the developed markets are now in a low growth environment, with GDP growth still struggling to reach pre-crisis highs amidst a collapse in productivity. This backdrop therefore places a premium on higher growth structural trends which, as active investors, we look for and try and take advantage of.
The 9 August 2017 was regarded by many as the 10 year anniversary of the global financial crisis. The European Central Bank (ECB) and the US Federal Reserve (Fed) ploughed c. £45 billion into financial markets that day as the credit crunch began. Astonishingly, the UK base rate on that day stood at 5.75%. Since the 5 March 2009, it has only ever been 0.50% or lower.