Investment Trusts

F&C Investment Trust - market snapshot March 2018

After a very strong run for equity investors and a period of subdued volatility, February proved to be more challenging, with a sharp rise in volatility and declining equity prices.
March 2018

Paul Niven

Managing Director, Portfolio Manager and Head of Portfolio Management, Multi Asset Solutions

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After a very strong run for equity investors and a period of subdued volatility, February proved to be more challenging, with a sharp rise in volatility and declining equity prices.

Investors had entered 2018 in an upbeat mood, with sentiment looking stretched (US investor bullish versus bearish readings were at their highest level since 2010) and an overbought equity market (the S&P Relative Strength Index reached a record high). On the 2 February, non-farm payroll data shook investors from their complacency as the release indicated a sizable increase in average hourly earnings – a trend that heightened expectations surrounding US inflation. Higher inflation means increased potential for interest rate rises – and that isn’t good news for many financial assets.
 
Volatility traded sharply upwards in the following days as the S&P 500 Index fell over 10% and subsequent US core consumer price inflation (CPI) data served to confirm the reality of higher prices. The expectation-beating number for CPI was negative for bonds, but equities rallied after an initial short sell-off. The price action perhaps tells us that the normalisation from the volatility shock is more dominant for markets for now than the data. At this time, the February sell-off appears more of a technical issue rather than a correction prompted by a deterioration in economic fundamentals. In that respect, it was akin to the flash crashes experienced in August 2015 and January 2016.
 
Despite rising volatility, on balance, it may be premature to call an end to the equity bull market. We believe that despite the rising inflation risk to asset prices, strong underlying growth should underpin earnings.
 
We continue to invest in a range of diversified underlying stock-selection strategies and believe we remain well placed to withstand any further short term volatility in markets.

All information as at February 2018, unless stated otherwise

 

The Company is an investment trust and conducts its affairs so that its shares can be recommended by Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority’s rules relating to non-mainstream investment products and intends to continue to do so.

 

The company is available for retail investors in the UK, professionally advised private clients and institutional investors who seek growth in capital and income from investment in global markets and who understand and are willing to accept the risks, and rewards, of exposure to equities.

 

 

Risk Disclaimer 

Past performance is not a guide to future performance. The value of your investments can go down as well as up, and you may not get back what you originally invested.

Risk Disclaimer 

Past performance is not a guide to future performance. The value of your investments can go down as well as up, and you may not get back what you originally invested.

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