The FTSE 100 is now at 6,241 having started the year at 6,242. Despite a turbulent start to the year equity markets are ahead in total return terms for the year to date with the FTSE 100 showing a return of 1.5% and the S&P 500 showing a return of 2.8% in Sterling terms.
Oil prices have stabilised at over $40 per barrel and mining, energy and industrial companies’ performance has improved since February. This has had short term effects on the relative performance of some of our carefully selected equity income funds simply because they do not tend to hold these companies. We retain our conviction in the long term positioning of our selected fund managers. Income generative equities also offer compelling yield and cash flow advantages relative to bonds and cash.
The outlook for the next few months is dominated by short term events such as the EU referendum, which is frustrating for long term investors. In our view, it pays to be brave and to remain invested. On the long view historical data shows equity markets to have been very resilient over time.
We are in an era of sub-par economic growth but analysis by Martin Wolf published in the Financial Times has revealed that the world economy has grown every year since 1946 when looked at in purchasing power parity terms. Innovations have been the catalyst for growth over time and there is no reason to believe that innovation is waning – we frequently hear about new technologies coming to the fore such as robotics, renewable energy and immuno-oncology at our regular private meetings with fund managers. There is therefore every reason to be optimistic for the long term.