BY DAVID MARCHANT, MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER
Equities continued their strong run in May as the global economy shrugged off Italian political concerns to once again deliver solid growth numbers. However, the situation in Italy did see Eurozone stocks fall, whilst US President Donald Trump’s ‘trade war’ rhetoric also negatively impacted Japan and the emerging markets.
The UK, however, was more positive as the public finances continued to improve, employment remained strong and consumer confidence bounced back from a weather-hit start to the year. As a result, our exposure to UK equities proved to be very beneficial to performance. Elsewhere, the US and Asia Pacific ex Japan were also strongly performing regions.
In fixed income, gilts were the best performing part of the sterling market, as the Italy situation in particular led to some risk aversion from investors. In contrast, corporate bonds were flat for the month, with shorter dated bonds outperforming. Property also delivered a solid return in May, with attractive rental yields supporting a market that we do not estimate will see significant capital growth in 2018.
Looking forward, we believe the global economic backdrop remains solid, which leads us to prefer equities over bonds from an asset allocation perspective. However, we believe some prudence is necessary, hence our slightly more defensive positioning through holdings of UK income orientated equities and shorter dated 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.
CLI01226 Expiry on 15 September 2018