BY DAVID MARCHANT, MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER
UK market outlook
Politics took centre stage once again in April, with UK Prime Minister Theresa May calling a snap General Election for 8 June. Markets also avoided the ‘nightmare scenario’ in France, with centrist Emmanuel Macron and far-right Marine Le Pen making it through to the final round of the French Presidential election with Macron remaining well ahead in the polls in the run-up to the vote.
Back to the UK, May’s Conservative Party has been well ahead in polling for some time with a comfortable lead over a Labour Party viewed by many as in disarray under the leadership of Jeremy Corbyn. Should the Conservatives win comfortably, as current polling suggests, the stronger mandate may be helpful through the two-year Brexit negotiations with European leaders.
The announcement resulted in a sharp spike for sterling, with the pound rising to a six-month high against the US dollar. The rise for Sterling had an impact on the large number of UK-listed stocks with strong dollar-based earnings, dragging the large-cap index lower during April. The mid-cap area of the market was more resilient, hitting a new all-time high.
Turning to economic data, UK Gross Domestic Markets (GDP) growth came in at 0.3% for the first quarter, far below the Monetary Policy Committee’s 0.6% target. Retail sales declined by 1.4% quarter-on-quarter, as higher inflation impacted consumer spending, raising concerns for the outlook for later in the year.
While UK government bond yields ended the month largely unchanged, spreads for corporate bonds tightened slightly over the period.
The CF Canlife Managed 0-35% Fund witnessed slight gains in April in a relatively muted month for UK equity and bond markets. We have not made any wholesale changes to the portfolio in recent months, maintaining our overweight positions in equities and property.
Our fixed income allocation remains at a slightly shorter duration than the benchmark, reflecting our view that short-duration positions can help the portfolio mitigate the impact of potentially higher rates in the future. Our overweight to credit was beneficial to performance in April.
As for UK real estate, we remain constructive on the asset class. We continue to believe buildings let on long-term leases at attractive yields will appeal to investors.
The value of investments may fall as well as rise and investors may not get back the amount invested.
The information contained in this document is provided for use by institutional investors, professional investors and professional advisers and is not for onward distribution to, or to be relied upon by, private 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 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.
CLI00788 Expiry 22 August 2017