These factors included concerns about a slowing economy in China and also in the US, where murmurs of a recession were voiced by some commentators. In addition, indecisive action by central banks, illiquid credit markets and low commodity prices weighed on investor confidence. This enabled government bond markets to benefit from the flight to safety.
In the second half of the quarter improving US data came through, alleviating fears somewhat, and the ECB announced further accommodating measures that included the introduction of negative interest rates.This resulted with investors returning to risk assets and equity returns negating much of the earlier damage. Emerging markets were particularly strong in the latter half, also aided by an increasing and stabilising oil price. European, Japanese and Swiss markets are still recording considerable falls year to date.
This month’s Brexit referendum has featured heavily in the news headlines and the uncertainty of the outcome has impacted on the currency. At the end of March sterling was priced at 1.44 versus the dollar and 1.26/0.79 versus the euro. The dollar has also been notably weaker following the dovish tone from the Fed, which has reduced expectations of rate rises this year.
The dollar index has fallen by 4% year to date. In terms of individual equity market returns during the quarter, the FTSE 100 (capital only) decreased by 1.1%; European equities by 5.2% in euro terms (MSCI AC EuropeCR LC) and the US increased by 0.8% in dollar terms (S&P 500 Composite CR).Emerging markets increased by 5.4% inthe quarter (MSCI EM Emerging MarketsCR LC) and the Japanese market fell by 12%(Nikkei 225 CR).
Government bond prices returned 5.1% inthe UK, 3.4% in the U.S. and 3.4% in Europe. Oil prices were up by 6.2% to $39.6 per barrel and the gold price increased by 16% to $1,232 per ounce. During the quarter, the Trustee Managed Portfolio Indices produced near flat returns across the three risk profiles. The Low-Risk index returned 0.35%, the Medium-Risk index 0.02% and the High-Risk index -0.12%. Positioning in US securities will have been beneficial to portfolio performance due to sterling depreciating by 2.5% against the greenback.
