• March was a positive month for global equities with the FTSE All-World Index gaining 2.2%, and FTSE All-World high dividend index gaining 1.5%
• The Global Equity Income portfolio was flat for the month
• The position in BAE Systems was trimmed and Asia Pacific High dividend was increased

A little surprising, March was a positive month for global equities with the global index (FTSE All-World Index) gaining 2.2%. Inflation has continued to remain high, reaching 7.9% in the US, and unemployment levels appear low. These two factors ought to spur on central banks to enact their plans to reduce global money supply by raising interest rates and begin quantitative tightening. The US yield curve is now close to inverting which historically shown an increased probability of a recession. All else equal, we would expect equities to perform poorly in this environment, however, liquidity remains elevated, and many other available assets offer unappealing negative expected returns.

Russia supplies around 20% of global hydrocarbons. Embargoes, and threats of embargoes, are in place which along with a cold European winter and lack of investment in the sector, saw oil and gas prices rise. This benefited the position in Shell (+7.5%). High inflation generally saw the healthcare sector perform relatively well and J&J shares rose (+7.7%) following a ruling that the controversial move to separate the talc business into a separate entity was approved.

On the negative side, the portfolio’s financial holdings performed relatively poorly with Admiral and Hannover providing disappointment (-15.5% and -7.2%).

As we’ve communicated before, global liquidity is at an all-time high. How the central banks reduce this to tame inflation without hurting the real economy is a difficult balancing act. The Global Equity Income Portfolio will continue to seek out those equity opportunities where the team believes companies will be able to sustainably deliver circa 150% of the index’s dividend yield.