Investment Newsletter | May 2013
Money Marketing Awards 2013
Best Wealth Manager
Markets Flying Again After a strong start to the year, stockmarkets took a little bit of a pause in March and April. However, the rally is now back with a vengeance! After reaching 6,529 on 14 March, the FTSE dipped as low as 6,249 on 5 April. However, this has proved a temporary blip and as I write (15 May) the FTSE has reached a new high of 6,700. It has not been at this level since 2007 and only around 300 points off the record high set in December 1999. Markets have been driven up by a combination of improving economic data and by central banks who continue with their unprecedented stimulus. The rally has been somewhat unusual as it has been driven up by the more “defensive” stocks, rather than “cyclical” companies. Defensive stocks are those that tend to do well whatever the economic environment and that pay higher dividends. These tend to outperform in falling markets, hence the term “defensive”. Normally, in a market rally of this strength it is the cyclical stocks, which are more linked to the global economic cycle, which outperform. This has not been the case this time as investors who had previously shunned equities, re-entered the market in the more cautious stocks. However, many of those more defensive names are now looking somewhat expensive relative to the rest of the market. We suspect that as the global economy improves investors will rotate their equity portfolios into more cyclical stocks.
Portfolio Changes We are tweaking our portfolios to benefit should this be the case. We have just made two switches within our equity portfolios for discretionary clients, firstly switching the Artemis Income fund to the Miton Multi Cap Income fund. The Artemis fund is predominantly invested in large cap defensive stocks, whereas the Miton fund will invest in any size of company from AIM stocks to multinational giants. Both aim to provide a steady return through a high dividend yield. We are also making a change within our global speculative portfolio, switching out of the
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