Market News

Market Update - March

21/03/2017

Kate Rogers

Kate Rogers

Head of Policy and Co-Manager - Charity Multi-Asset Fund

Positive economic momentum

The world economy has started 2017 with strong momentum and business surveys continue to signal robust growth. Economists have upgraded forecasts and we are now focusing on whether the current economic strength can be sustained. As activity has picked up, so too has inflation – although much of the move so far has been from oil price increases. Rising inflation provides a direct threat to conventional bonds and to consumer spending and we are cognisant of the impact this could have on earnings and equity markets.

Political uncertainty continues

The Dutch election result prevented the anti-immigration Freedom Party gaining power and provided reassurance to investors concerned about the rise of more populist anti-EU governments. The future of the EU and the stability of the euro are perceived to be potentially at stake from upcoming elections in France and Germany this year. Although we see the probability of an extreme outcome as low, uncertainty is likely to persist until the election outcomes are known later this year. Investors will now turn their attention to the French presidential election over the next few months which could have significant consequences for the EU should Marine Le Pen’s Front National win, a possible outcome though not our central scenario. We will also see the UK triggering Article 50 this month, starting the proceedings to leave the European Union in around two years’ time. We do not expect a market reaction given that it has been widely flagged for some time.

Portfolio implications

The strengthening economic backdrop is positive for corporate earnings, and the prospect of expanding fiscal policies supports equities. We retain our position in equities to benefit from earnings strength and positive sentiment, although are conscious of valuations and are biased towards active managers following a ‘value’ approach to investment. Inflation and political risk in Europe are headwinds for conventional bond markets, and we continue to advocate an underweight position. UK commercial property capital values have been supported by overseas investment, as sterling weakness has discounted UK property assets. We remain well disposed to property as the income characteristics are attractive. Our charity portfolios remain diversified, with allocations to alternative investments and absolute return approaches to dampen overall volatility in uncertain times.

Author

Kate Rogers

Kate Rogers

Head of Policy and Co-Manager - Charity Multi-Asset Fund

Kate specialises 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.

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 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 has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

Giles Neville

Giles Neville

Head of Charities giles.neville@cazenovecapital.com
John Clifton

John Clifton

Business Development Manager john.clifton@cazenovecapital.com