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Global Equity Income Portfolio: May 2022

Money supply continued to be reduced globally and with the background of continuing high inflation and reasonable employment figures, central banks look to commence quantitative tightening and raise interest rates. This was negative for equity markets. The FTSE All-World Index declined 7.9% and the FTSE All-World High-Income Index fell 4.5%.

The Global Equity Income Portfolio was slightly more resilient declining 3.0%. Merck +8.1%, AT&T +7.3%, Coca-Cola +4.2% were the best performers. These sectors tend to perform better in weak markets.

The worst performing positions were JPMorgan (-11.8%), Microsoft (-10%) and US Bancorp (-8.6%).

The position in the UK High dividend ETF was sold and a new unit was established in VW Preference shares. VW is the world’s largest automaker and is well positioned to continue to be a leading electric vehicle manufacturer. The company is on track to hold an initial public offering of, some of, their shares of Porsche and plans to return much of the cash raised in a special dividend.

For now at least, China continues to implement their zero-tolerance approach to COVID-19. This presents something of a challenge given the high rate of transmission of the Omicron variant. Regional lockdowns are hampering Chinese economic activity. These lockdowns have wider global implications as supply chains will come under further pressure.

Inflation is remaining elevated, monetary supply is reducing, supply chain issues are mounting due to Chinese lockdowns, and both growth and corporate profit expectations are slowing. Overall the macro-outlook for risk assets, unless central banks change policies, for now remains challenging.