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Defensive Portfolio Update - Summer 2018

20 July 2018

Second quarter performance analysis for the St. James's Place Defensive Portfolio.

As global bond indices remained relatively flat, equity performance helped the Defensive Portfolio deliver a positive return over the period.

Economic growth rates and market indices worldwide offered varying signals across the quarter. In the US, corporate earnings for the first quarter came in at their highest quarterly reading since 2011, boosted in part by the package of corporate tax cuts and repatriation taxes signed off by the US president late last year. While US stocks did rise in the second quarter, however, gains were relatively limited in local terms, a trend mimicked in Europe. In China, meanwhile, the Shanghai Composite index entered bear market territory, while the UK offered a bright spot for stocks, aided by a weak currency and a rising oil price. This mix of trends was captured in the performance of the Multi Asset fund, which is co-managed by teams at Invesco Perpetual, Schroder and Payden & Rygel.

Strong economic growth and corporate earnings in the US contributed to expectations that the Federal Reserve would press ahead with rate rises; indeed, it made an increase of 0.25% in June and signalled more to come. Interest rate rises are often evidence of a healthy economy, but can be negative for bonds, especially in the short term. The Investment Grade Corporate Bond fund, managed by Loomis Sayles, suffered as a result, although losses were shallower than in the broader market.

Although US stocks generally had a fairly flat quarter, technology stocks were an exception, enjoying a particularly strong rise. In the main, this was due to a combination of strong corporate earnings and the recovery from a fall in February, when Facebook had suffered criticism over its failure to protect user data, some of which was then used to influence voter opinion. (The news did not affect Facebook’s share price alone, as other technology stocks felt the contagion effect.) The Worldwide Opportunities fund, which is co-managed by Burgundy, Artisan Partners, and Select Equity, benefited from its approximately 20% allocation to technology stocks, not least Facebook, which rose some 20% over the three-month period. Despite the recovery, Morgan Stanley, in a recent research note, argued that the market continues to underestimate Facebook’s growth potential.

The UK Absolute Return and Alternative Assets funds also achieved positive performance over the quarter, contributing to broader Portfolio returns.

You may also like to access the full Defensive Portfolio Update.


The price of funds and the income from them may go down as well as up.  You may get back less than the amount invested.

Portfolio fund allocations are not rebalanced automatically. Thus Client Portfolios may not include all of the stocks mentioned in the commentary, as fund allocations may vary between clients, leading to different investment experiences.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

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