BY DAVID MARCHANT, MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER
The spike in volatility witnessed earlier in the year has been all but forgotten, as June saw risk assets perform solidly once more, whilst the VIX reverted back to its low volatility trend. International – particularly US – equities were the primary drivers. In the UK, both the equity and fixed income markets were relatively flat, despite Q1 economic growth being revised up and further evidence of increased consumption. While the Brexit overhang remains and parts of the high street continue to suffer, the economy appears to be showing signs of bouncing back from the, arguably, weather induced weakness of the first quarter.
Globally, ongoing trade war rhetoric remains a concern as do European populist politics, particularly in Italy. This should not come as much of surprise, given the extent to which the southern European economies have underperformed their northern counterparts in recent years. However, the market has largely shrugged off concerns such as these in recent years, believing the status quo can continue. While we agree with the consensus, such longer term threats should not be entirely dismissed.
Looking forward, despite the extended economic cycle, equities still look the best value, with attractive valuations and dividend yields to be found in the UK. Against a backdrop of monetary tightening – and a significant portion of the market trading at negative interest rates – we have to be more selective within fixed income, continuing to favour shorter duration corporate bonds.
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. Income from investments may fluctuate. 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. The funds may invest in property funds that may be illiquid and subject to wide price spreads, both of which can impact the value of the funds. The value of the property is based on the opinion of a valuer and is therefore subjective.
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.
CLI01243 Expiry on 15 October 2018