Despite various political and economic events, equity markets have made headway in the year to date.
The FTSE 100 started the year at 7,142 and is now at 7,438 having finished July at 7,372, indicating very modest returns in the last month, which is primarily attributable to some stock specific issues discussed below.
In percentage terms the FTSE 100 has returned 7.3% including dividends so far this year, whilst the FTSE World index has returned 10.1% on the same basis. This highlights the importance of the global exposure within client portfolios, which has assisted overall performance. Gilt returns have been more modest and the FTSE Actuaries UK Conventional Gilts All Stocks index has returned only 2.5%.
Our preferred fund managers take a long-term view and focus on fundamentally strong businesses, which typically have both income and capital growth potential. Specifically, these companies are those with better business models and strong balance sheets which were purchased at reasonable valuations.
We continue to advocate tactical cash holdings in portfolios. Interest rates remain low, it is, however, important to protect the holdings in equity funds from a forced sale should markets prove turbulent.