We have been through a period of dramatic volatility and, while the recovery in financial markets has continued into the start of the new financial year, there is uncertainty over the speed with which economies can rebound from the downturn. It is to be hoped that the huge monetary and fiscal reaction from central banks and governments can collectively support the recovery and there are signs that this is starting to feed into the economic data. We are expecting interest rates to remain near zero in most parts of the world which will support stock markets once again. Progress with a vaccine for COVID-19 could have a major impact on the markets and allow a speedier global recovery but we need to hope that, at the least, the pandemic remains under control in the months ahead especially in the key economies. Further lockdowns would undermine the recovery and create even larger fiscal policy challenges for the longer term.
We continue to assess the medium-term impacts of COVID-19 across sectors, and how this will or will not alter consumer and corporate behaviour going forward. We will also be watching political developments with the US election coming closer. The ongoing UK/EU trade negotiations and the geo-political tensions surrounding China will also be important to monitor.
As a smaller companies fund, the performance of the trust will continue to depend heavily on the quality of our stock selection. With a broadly spread portfolio, focused on companies with strong management teams, business models and balance sheets, we are optimistic for the medium-term, though remain alert to the near-term risks.