BY MIKE WILLANS, HEAD OF EQUITIES
Given the seemingly continuous contrary political rhetoric in recent months, including topics such as immigration and trade wars, one could be forgiven for adopting an increasingly bearish outlook. Indeed, equity markets struggled in June, with China in particular suffering a sharp decline. However, following a recent research visit to New York, the overwhelming message was one of positivity, with a number of exciting investment opportunities emerging. US equities have been resilient in June, as have the UK and European markets, although all are relatively flat on a year-to-date basis.
More recently, consumer stocks have prospered, and as such we have added a number of positions which we believe show further potential. For example, Under Armour, TJX (TK Maxx in the UK) and Chipotle Mexican Grill have been amongst the best performers of late, whilst we have added a new position in CBS Network. We also see potential in PetIQ, which has begun opening veterinary clinics in Walmart stores. With a model that includes easily available prescription medication and no appointments, PetIQ have the potential to revolutionise the traditional and closely guarded animal care industry. Elsewhere, we have been adding cyclicality to the margins of the portfolio, with new positions in Swatch and Gestamp (auto components) at the expense of more traditional food retailers.
As we emerge from the first half of the year, we can reflect on a burst of volatility across global equity markets, which have since fallen once more. However inflation, central bank tightening and trade war rhetoric means risks still remain. Therefore, we are confident that our long-term tilt towards value areas of the market means that the portfolio is well-placed for long-term outperformance. Value has underperformed again so far in 2018, but with valuations extended and treasury yields rising, we expect this to reverse in the second half of 2018.
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.
CLI01245 Expiry on 15 October 2018