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In a show of resilience, most major equity markets produced positive returns in Sterling terms in May. A combination of progress against controlling the COVID-19 infection rate in the major economies and substantial actions by central banks and governments to support businesses and individuals strengthened investor confidence. The MSCI World index gained 6.95% in Sterling terms over the month, whilst the S&P 500 was up 6.95% and the FTSE 100 gained 3.34%.

Whilst these short term gains are positive news. our Investment Committee believes there could be some “bumps in the road” ahead. “Lockdown” measures to control the spread of COVID-19 have had a significant short-term economic impact and it remains to be seen how rapidly the global economy will recover as these restrictions ease and whether recovery will be evenly spread or if some countries or regions will lag behind. There are also political risks in play, notably the relationship between the US and China and their ongoing trade dispute, the November Presidential election in the US, which is coming into sharper focus and the lack of progress in trade talks between the UK and EU, raising the possibility of a “No Deal” Brexit.

Given the uncertainty inherent in both equity and bond markets at the moment, the Investment Committee recently made some changes to our model portfolios. The rationale was to focus portfolios on funds which have a focus on larger companies with strong financials which would benefit from any improvement in the economic outlook, but which have the most potential to be resilient if the outlook deteriorates.

The Investment Committee continues to meet regularly and we are closely monitoring economic data, portfolio and fund performance and reviewing our asset allocation. We will keep you updated as our thinking progresses.

This article is for information purposes only. It does not constitute investment advice and is not a recommendation to invest. The value of investments and the income from them may go down as well as up and you may not get back your original investment.  Past performance is not a guide to the future.

Date of publication: 10 June 2020

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