Market update – November 2017


Global economy, firing on all cylinders

Last month the improvement in the world economy was given the official seal of approval by the International Monetary Fund which revised up its projections for global growth. Although the outlook for both the US and UK was downgraded, this was more than offset by upgrades in the eurozone, Japan and Emerging Markets. Whilst such forecasts can be seen as lagging indicators, there are signs that this positive momentum in global growth could be sustained with leading indicators pointing to synchronised strength. However, despite the strengthening of activity, inflation remains relatively subdued in most economies creating consternation amongst policymakers whose models would have predicted a pick-up in wages and prices. The outlier has been the UK economy, where inflation has reached five year highs and the Bank of England has responded with an increase in interest rates.

Eurozone political risk still simmering

Though many of the major political obstacles have now been overcome, events in Spain highlight that political risk continues to simmer under the surface. Elections in Austria, the Catalan situation and recent referendums in Italy all highlight a trend towards populist, nationalist and now regionalist tendencies. The investment impact of these political risks is cushioned by quantitative easing (QE), and the boost that this brings for the economy and financial markets. The European Central Bank is set to keep QE going into 2018, but will eventually phase out the policy over next year.

Implications for portfolios

Our charity investment portfolios have benefited from the growth in economic activity, earnings and consequently share prices. We retain our holdings in equity markets, as global economic growth remains supportive and earnings forecasts are positive. Equity valuations are no longer cheap, although there are opportunities and our portfolios are tilted towards those companies, funds and regions that offer best value. The slight change in tone from many central banks means that we are likely to see a gradual reduction in monetary stimulus over the coming years. At some stage we expect this to translate into increased bond yields and remain cautious on the prospects for bond markets, particularly if inflationary pressure builds as a result of stronger global activity. Alternative assets are valuable diversifiers in portfolios and we include absolute return funds to provide a ballast where appropriate and property for attractive income characteristics.


The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

James Brennan

James Brennan

Portfolio Director