Global Equity Income Portfolio: January 2021

Summary

  • The risk-on environment following the positive results from three coronavirus vaccines in November continued into December. Smaller companies saw a significant share price rally. The Global Equity Income Portfolio returned 3.3% during the month.
  • The UK and EU came to an agreement over their future trading relationship.
  • New variants of COVID-19 now threaten for a darker economic tunnel, dampening the relief that was felt following the news of a vaccination roll-out. Central banks continue with easy monetary policy, which is likely to help investors continue to stay the course.
Market update

Vaccine optimism and continued easy money supply extended the equity market rally into December. As expected after some brinkmanship the UK and EU came to an agreement over their future relationship, while in the USA fiscal spending plans became more advanced. All of these events were positive for sentiment and investors enjoyed a risk on environment. The performance of smaller capitalisation stocks was particularly strong with the light at the end of the COVID economic tunnel seeming brighter and a risk-on environment developing. 

The Global Equity Income Portfolio, largely focused on mega capitalisation stocks returned 3.3% with strong returns from UK stocks notably financials, while industrials holdings lagged. In light of the post Brexit transition period agreement, the UK high dividend exchange traded fund holding provided the best performance with a 9.2% return. CK Hutchison Holdings was the worst performer following a very positive month for the share in November.

No adjustments to the model portfolio were made during the month.

Other than the wonderful vaccine news from November, COVID-19 virus news has been increasingly negative. Two new variants, one in the UK and one in South Africa, have been shown to have increased transmission rates. This means that economically things might well get worse in the near term however an end to economic lockdowns are in sight, due to the rollout of vaccination programs. Nonetheless, equity markets tend to discount short term difficulties and, with central banks still supportive and providing we see no further pathogenic mutations, the coming economic recovery and lack of returns available from other asset classes remains encouraging for equities.