Adding to favoured financials and review prompts sale
We were active within financials – a sector where we have a modest overweight. Concerns over scope for additional upside given the outlook for interest rates led us to trim back our holding in US Bancorp – a move that allowed us to add to financial names where we have a greater conviction. This included diversified global insurer Allianz, as well as two exchanges, Intercontinental Exchange and Japan Exchange. We also took profits in diversified industrial company Roper Technologies given the tremendous relative outperformance of late which leaves more limited upside.
Broader positioning remains unchanged, with an ongoing bias towards higher quality, sustainable growth companies that can prosper in any near-term economic and policy-driven volatility. We continue to add to positions where we see strong underlying quality and where the market allows us to top-up holdings at more attractive levels. And where appropriate, we have been building positions that offer more defensive revenue streams given the slowdown in economic growth expectations and trimming holdings that have performed strongly and offer reduced upside potential.
Sector-wise, Industrials, Information Technology, Consumer Discretionary and Healthcare are our main overweights, whilst Financials is a modest overweight. The portfolio is underweight Communication Services, Energy and Consumer Staples. At the country level, Japan (keep an eye out for a note on our recent trip to Japan) and the UK are our biggest overweights, with the US our largest underweight.
Q1 results provide momentum
Markets maintained upward momentum in April, with a better-than-expected Q1 earnings season picking up the baton from the improving economic data and central bank policy that provided impetus in the first three months of the year. Looking forward, however, we’re mindful that a number of obstacles remain in place and factors such as tensions around global trade, geopolitical tensions and central bank rhetoric mean that volatility looks set to remain a feature, and we remain vigilant. Overall though, we remain relatively constructive, particularly on a medium to long-term view.