A lacklustre return from global equities for the quarter hides some volatile monthly returns. World equity markets fell sharply in April following poor economic and corporate data which indicated a decline in the fortunes of the world’s largest economy. However, markets soon bounced back following a rise in interest rates in May as investors took the increase as a sign of the Federal Reserve’s confidence in the economy.The US dollar’s appreciation against the Euro and Sterling continued during the quarter as investors’ focus was drawn toward the direction of US interest rates relative to rates in both the Eurozone and UK.

The Fund returned 2.5% in the quarter helped by very good stock selection in America and good performance from the Pacific Ex Japan region. The worst performing region was Japan as economic data during the quarter showed no clear direction for the economy. Given the good relative performance from the Pacific Ex Japan region, an expectation of limited returns from the region for the rest of the year and more positive economic data since the quarter end from Japan, it appears sensible to take some profits from the Asian Growth Fund, thus reducing the overweight position, and reinvest the proceeds in Japan.

Looking forward, some volatility is likely as economic data remains mixed and commentators will be able to point to economic data that supports their positive or negative view. Whilst we remain cautious on the global economy given numerous structural imbalances (twin deficits, consumer debt), there is an increasing chance that the “Goldilocks” economy (one that runs neither too hot nor too cold) prevails, at least in the short term.This scenario could be positive for equities and we remain focussed on companies with stable predictable cash flows, barriers to entry, healthy balance sheets and good dividend yield.