Markets have continued their general upward trend in 2017. After falling slightly in January, February saw the FTSE 100 index make headway once again, ending the month at 7,374.
At a global level, equity prices remain elevated, with all of the major US equity indices at or near their record highs, buoyed by President Trump’s promise to spend $1 trillion on infrastructure projects and to cut taxes. However when considering the outlook going forward, it is important to view this improving economic data against an uncertain political environment. We are also concerned that much of the recent growth in the UK economy has been fueled by personal debt.
Cyclical sectors performed well in the latter part of 2016, which presented a headwind for some of our carefully selected UK fund choices. In contrast February proved more positive for our core funds with the FTSE All-Share pharmaceutical sector up 11%, whilst tobacco and consumer goods also had positive total returns of 4% and 7% respectively. Conversely the resources sectors of the FTSE All-Share, where our core funds have very limited exposure, declined last month with mining down 3%, and basic materials, oil and gas all down around 2%.
Whilst short term data is useful, it is more important to remain focused on the long term picture, looking for consistent returns.
We have had a number of positive fund manager meetings since the beginning of the year including meetings with Sebastian Lyon of the Trojan fund and Suzanne Hutchinson of Newton Real Return in February, which gave us the opportunity to review a range of asset classes. We are due to meet with Neil Woodford in March and also have meetings scheduled with Francis Brooke of Trojan Income and Nigel Thomas of Axa Framlington UK Select Opportunities.