April 2016

Manager Commentary

It’s been a steady start to the second quarter of 2016 but there are number of dark clouds forming on the horizon. The EU Referendum in the UK will be a very closely contested race and has evolved into much more than a vote on Brexit. The wider ramifications of the UK leaving the European Union could increase the pressure on Greece and spread to some of the other peripheral countries such as Portugal that have adopted the euro. The US elections will also play an important role in determining the direction of the US dollar and a Trump victory could mark the beginning of a trade war with Mexico and China. Russia has also become noticeably more confrontational with its military presence in the Baltic Sea and surrounding airspace. In April, the MSCI World climbed 1.38% and the FTSE 100 gained a more modest 1.08%. The S&P 500 rose 0.27% as investors contemplate the longer-term consequences of a potential Trump victory in November. Government bonds in the UK and Germany came under selling pressure during the month and ten year yields climbed 18bps and 13bps respectively. Sterling strengthened for the second consecutive month and closed at a twelve week high versus the US dollar at 1.46. The Japanese yen traded at an eighteen month high against the US dollar to finish up 5.52% at 106.35. The GSCI climbed 9.67% and the price of oil rallied 19.77% to close at $45.92 per barrel. Looking forward, volatility fuelled by economic and political uncertainty is likely to rise throughout global markets during the summer months and risk management, portfolio diversification and currency hedging will be more important than ever.