Strategic Growth Portfolio Update - Winter 2018
Fourth quarter performance analysis for the St. James's Place Strategic Growth Portfolio.
The Strategic Growth Portfolio posted a negative return over the quarter.
Worries over growth afflicted most of the major economies in the final quarter, contributing to the downturn on markets. Third quarter growth – reported in the fourth quarter – came in negative for Germany, which is often viewed as Europe’s economic powerhouse; at the same time, eurozone growth turned more sluggish. Japan, likewise, saw growth turn negative after a series of natural disasters and extreme weather during the third quarter.
The Greater European Progressive fund, co-managed by Investec and Burgundy, outperformed the wider market but delivered negative returns over the quarter. Social unrest in France, coupled with a budgetary dispute between Rome and Brussels, added to political uncertainty, buffeting markets. But the fund was aided by its allocation to the industrials sector. Vestas, a wind turbine manufacturer, was a positive contributor, buoyed by signs that pricing across the sector is beginning to stabilise. Despite troubles in the broader financial sector, holdings in Plus 500 and Raiffeisen Bank both provided support. Detractors included Scandinavian Tobacco, which reported disappointing earnings, and Wirecard, a German payments processor.
The Japan fund, managed by Nippon Value Investors, suffered due to its exposure to the consumer discretionary, financial and healthcare sectors, and from its low allocation to more defensive sectors. KYB, a components company, was another detractor, as it suffered the effects of a product liability scandal. Early indications, however, suggested that growth figures for the Japanese economy in the fourth quarter should show a return to the black.
US equities declined dramatically in the fourth quarter despite continued economic growth. The US midterm elections in November saw the House of Representatives turned over to the Democrats. The ensuing budgetary face-off led to a government shutdown in December. But US equity market investors were perhaps more worried about whether the Federal Reserve’s programme of quantitative tightening would combine with trade tensions and the end of the Trump-tax-cuts boost to bring a period of stellar growth and stockmarket returns to an end.
The North American fund, managed by Aristotle, struggled over the period. Aristotle sold out of its General Electric position in mid-October, crystallising a loss in local currency terms, on concerns over the direction in which the new CEO, Lawrence Culp, plans to take the company. GE had announced on the first day of the quarter that it might have to write down the value of its business by up to $23 billion.
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.