BY MIKE WILLANS, HEAD OF INTERNATIONAL EQUITIES
October proved to be another strong month for global equity markets, led by the United States. Despite the Trump administration not yet passing any significant policies, Purchasing Managers’ Index (PMI) figures remain near-record highs and the economy continues to add jobs. This has resulted in both treasury yields and inflation edging higher, whilst a potential tax bill could provide a further boost.
Indeed at a recent conference we attended, almost every company in attendance – even the most cyclical – were optimistic, with greater earnings visibility and a more supportive macro environment. Elsewhere, the Eurozone’s economic recovery maintained its momentum in October, whilst the UK continued to prove more resilient to Brexit-related uncertainty than first thought, with third quarter Gross Domestic Product (GDP) growth revised up to 0.4%. Asia also continued to outperform, as Chinese President Xi Jinping consolidated his power base at the 19th Party Congress, with the promise of future reforms well-received by the market.
Amidst this backdrop, the Fund retained its focus on the more value areas of the market, which we believe will benefit from a higher interest rate, higher inflation global economy. For example, we are now in a phase of global monetary tightening which should put upward pressure on government bond yields and benefit companies such as banks, which are more profitable when yields are higher. In contrast, we continue to believe that growth stocks are trading on excessive valuations and represent a significant downside risk.
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Currency fluctuations can also affect performance.
The information contained in this document is provided for use by investment professionals and is not for onward distribution to, or to be relied upon by, retail investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice. This document is issued for information only by Canada Life Investments. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at www.canadalifeinvestments.com.
Canada Life Investments is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
CLI001013 Expiry on 15 February 2018