- The Global Equity Income Portfolio (USD) returned 5.8% during the month, against the global index return of 6% (FTSE All-World), and the FTSE World High Dividend Index returned 6.5%.
- Evidence suggests that the Coronavirus Omicron variant helped drive the market higher.
- The month saw outperformance of the value-based style, perhaps as investors factor in interest rate rises that will come from central banks in 2022.
Propelled by both incredibly easy monetary policies and economies reopening, 2021 provided high returns to equity investors. The traditional equity price Santa rally delivered positive returns with the FTSE All-World index climbing a further 4.1% during the month of December. The month saw outperformance of the value-based style.
Several companies held in the Global Equity Income Portfolio produced strong returns during the month, with no less than five holdings providing double digit gains. Only one position, JP Morgan, provided a negative return and only just at -0.3%.
Following elevated trading activity in November, no positions were changed in December.
Thankfully data suggests that the Omicron variant has continued to show to be a relatively minor risk to health which is enabling economies to open.
Looking forwards to 2022, we anticipate an initially favourable environment for global equities while liquidity is still abundant.
The outlook for equity prices for the balance of the year will however be less rosy than it has been. Growth rates and inflation are both likely to decline. Household savings levels have largely returned to pre-pandemic levels and supply chain constraints have been easing. Money supply, arguably the greatest influence on equity market returns, will be reduced during the year. Indications from central banks are for less supportive monetary policies with quantitative easing set to end in the USA and interest rate rises on the horizon. Mid-term US elections in November will probably herald policy gridlock with Republicans potentially blocking substantive fiscal plans from President Biden.
While monetary policy has been extremely loose multiple expansion, rather than earnings growth, has been responsible for a large portion of equity returns generated by many stocks. The team continues to be focused on identifying stocks that we believe trade on a discount to their fundamental values and provide an above market rate of dividend income.
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