April saw a sustained barrage of Federal Reserve speeches and events. One count was of 45 meetings in just 20 days. With the US banking system continuing to display signs of pressure on the regional banks, central bankers were keen to demonstrate the situation was under control. We continue to see deposit flight to larger better capitalised institutions. The message from the central banks is still that they will reduce global liquidity to tame inflation, and that the US economy is set for a mild recession.
The month saw many companies report earnings. As is typical earnings estimates tend to be well managed by corporates in advance of reporting. Given a weakening economy and typical over optimism for many companies third party estimates generally declined in advance of announcements decreasing the importance of results versus consensus estimates, and enhancing the importance of future guidance from companies. We have for some time been focused on trying to position the fund with companies that can deal with elevated levels of inflation. Pleasingly the consumer staples names held have successfully been passing on inflation, and our healthcare, technology companies and the luxury goods names have also been less impacted than the general market.
With so much uncertainty about the future direction of central banks, and economies it was not surprising that markets were volatile. Generally shares of higher quality, less cyclical and lower growth, companies performed better than lower quality and higher growth companies. The best performing shares during the month were those providing positive earnings updates and outlooks, and conversely those that disappointed saw particularly severe share price declines.
The FTSE All World Index gained 1.6% during the month and the Global Leaders Fund (I Class USD) gained 1.8%. The best performers held were Novartis +11.7%, Ping An +11.0% and Hannover Re +9.1%. While the worst performers held were Alibaba -17.1%, NXP Semi -12.2% and TSMC -6.6%.
Novartis surprised the market, and in fact us, with better than anticipated operational performance and uptake of new products, as well as encouraging update from their generics division. After the heightened interest in the company following the unveiling of their plan to split into six, there was little news for Alibaba during April. We would anticipate more detailed information on divisional plans to be received positively in the future, and meanwhile note the continued rebound in economic activity in China.
Leading indicators suggest that we are past the peak of inflation which should reduce from here. Lower inflation means more scope for central banks to adopt more dovish policies, or at least to stop tightening monetary conditions. Over the next few months however the relentless messaging from the central banks will be on continued tightening. Our stock picking team continues to seek to identify those shares who we believe will do well irrespective of what those at the helms of currency printing presses decide to do next.