Market News

Market Update - February

21/02/2017

Kate Rogers

Kate Rogers

Head of Policy, Co-Manager - Charity Multi-Asset Fund, Cazenove Charities

World economy shrugs off uncertainty…for now

Despite the increase in economic uncertainty, the world economy is strengthening with business surveys signalling an acceleration in growth. Concerns about Brexit and President Trump’s populist policies have been swept aside, prompting talk of a crisis in economic forecasting. Growth forecasts are likely to be upgraded, but we still have doubts about the medium term sustainability of the upswing now that oil prices and inflation are rising again.

Europe: improving momentum and fundamentals

Europe faces significant headwinds in 2017. Inflation is set to rise which will reduce the purchasing power of households, while political uncertainty, both at home and abroad, could weigh on confidence. Fortunately, cyclical indicators suggest growth was stronger than expected at the end of 2016, with the momentum continuing into January. Moreover, the economy’s fundamentals are improving, with employment growth rising and wages starting to recover.

Portfolio implications

As economic fundamentals have been improving, so too have earnings. Consensus earnings expectations have not been subject to the usual beginning of the year downgrade cycle. This has supported equity markets, along with positive fund flows with investors moving away from bonds as yields increase and prices come under pressure. Sentiment is also supportive for equity markets, although we are conscious that valuations are not cheap. Nevertheless we are maintaining our equity positions, embracing active management, diversification and nimble asset allocation to help steer portfolios through any volatility.

Author

Kate Rogers

Kate Rogers

Head of Policy, Co-Manager - Charity Multi-Asset Fund, Cazenove Charities

Kate has twelve years investment experience, specialising in investment on behalf of charities, endowments and foundations and joined Schroders Charities in 2005 after four years with Kleinwort Benson Private Bank Charity team.

Kate is chair of the Charity Investors' Group, which is a membership organisation providing a forum for investment debate. In this role she has collaborated with CFG to launch a guide to written investment policies and 'For Good and Not For Keeps' published by the Association of Charitable Foundations in 2013. Kate also regularly writes on charity investment in the charity sector press.

Kate is also Portfolio Director at Schroders, where she manages a common investment fund, The Charity Multi-Asset Fund, which aims to generate a regular income for charities whilst protecting the capital against inflation over the longer term. She is a CFA charterholder and has a BSc (Hons) in natural sciences from the University of Durham, is Chair of her local community foundation, and governor of her local primary school.

  Kate Rogers

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital Management does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital Management has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system.

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