Politics again dominated in April with the big news for European investors being the relief that centralist Emmanuel Macron progressed to the second round of the French presidential election and has then went on to secure election ahead of Le Pen. Elsewhere, there was an announcement of a snap election in the UK and investors mulled over Trump’s first 100 days in office against the backdrop of weaker than expected US growth.
In Europe markets were elated as centralist candidate Emmanuel Macron made it through to the second round of the French presidential election with the highest proportion of first round votes. He faced-off against far-right candidate Marine Le Pen who came second in the first round, but markets had feared a situation where she would face a less mainstream candidate. Subsequently Macron won the second round and will become president. The eurozone economy continued to pick up steam with unemployment falling to 9.5%, its lowest level for almost eight years, and inflation ticking up to 1.9%, close to target.
In the US, President Trump unveiled a raft of proposed tax reforms including a cut in corporation tax from 35% to 15% and a one-off reduction in the tax rate on repatriated overseas profits. The announcements, skimpy on detail and coming in the form of a single page document, were not particularly well received by the markets. Instead they fuelled a sense that Trump’s achievements in his first 100 days have been at best extremely modest. A fall in US economic growth to an annualised 0.7%, its weakest in three years, added to the mild sense of US pessimism.
In the UK, Theresa May’s announcement of plans for a snap election on 8 June shocked almost everyone given her many previous denials that such a move was under consideration. May cited the chance to secure a stronger majority in order to strengthen her negotiating hand during Brexit talks, but the unpopularity of Labour’s Jeremy Corbyn and the chance to free herself from David Cameron’s 2015 manifesto pledges no doubt played a big roll. The pound, already strengthening throughout the beginning of the month, shot up on the news.
The euro had a reasonably strong month, up 1.8% against the dollar, 1.8% against the yen, 1.6% against the rand and 2.6% against the Brazilian real. It was, however, down 1.6% against the pound.
Equities and commodities struggled somewhat over the month with only European equities and Emerging Market equities posting positive returns in euro terms. Amongst equities, developed Asian and US equities were particularly hard hit. Emerging market bonds and high yield bonds both had a good month, although higher quality bonds also performed well as rates fell.
Performance was solid over the month across the Core Active portfolios, but the Enhanced Indexing portfolios struggled as global equities had a difficult month and factor performance was not able to make up for this.
Core Active outperformed Enhanced Indexing due to stronger regional equity performance, particularly in Europe.
Relative performance over the month was mixed, with the 8 balanced funds we track regularly up on average 0.1%, with the highest performing up 0.8% and the worst down 0.4%.
Core Active 6 outperformed 7 of these 8 competitors.
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