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In this week’s film, Senior Portfolio Manager Anthony Rawlinson reflects on a good week for equities, particularly in Europe, as markets react to the latest announcement from the European Central Bank on extending its bond-buying programme into 2017.

Market Update

Last week there was a strong performance from developed equity markets. The FTSE 100 climbed 2.6% and the S&P 500 added 2.5%. Supporting factors for equities continue to be a strengthening US economy and improving sentiment on the European economy. In this regard, the announcement by the European Central Bank (ECB) that quantitative easing (QE) will be extended into 2017 was a key driver of the markets.

Brent crude, the international oil benchmark, has firmed at $53 a barrel following OPEC’s agreement to trim production in the coming months, while sterling settled into a $1.24-25 trading range.


ECB President Draghi

The most significant news from the latest meeting was President Mario Draghi’s announcement that the ECB would extended its bond-buying programme (QE) into 2017, though the monthly purchases would be trimmed from €80bn to €60bn beginning in March 2017.  Draghi’s comments reinforced his previous assertions that the ECB would “do what it takes” to support economic recovery in Europe.       

Given speculation ahead of the meeting that the ECB might start to ‘taper’ its bond buying, markets reacted positively to the news.  


What does it mean for the Coutts House View?

We believe last week’s strong showing from developed equities endorses our positive stance on European equities in our portfolios. We believe valuations remain attractive and see positive earnings growth for the asset class into 2017.

While government bonds remain a good diversifier within portfolios, we continue to believe that in an environment of rising interest rates their prospects for generating positive returns are poor. We continue to favour investment-grade (higher credit quality) corporate debt, which in our view offers more attractive yields for our portfolios compared to government bonds. We also believe the higher yields adequately compensate for the additional risk of corporate debt, especially given a favourable economic outlook.

Emerging Markets

Emerging market equity has continued to perform well in recent weeks. Coutts currently allocates  about 7% in a typical balanced investment solution,  holding exposure through a range of third-party funds. These are up by about 35% in the year to date in sterling terms, providing a good boost to performance.

After several years of emerging markets struggling to gain momentum, sentiment finally appears to have shifted with greater focus on fundamentals.  Having a robust investment process and a firm set of investment principles has supported our positioning. There may be headwinds in the short term as trade policies evolve but over the longer term we continue to see value and diversification benefits.


Anthony Rawlinson

Senior Portfolio Manager

Anthony is a Senior Portfolio Manager in Client Investment Management and Wealth Structuring, having joined Coutts in 2011, and is responsible for running client portfolios for high net worth individuals.

Prior to joining Coutts, Anthony was Head of Private Banking for Standard Chartered Bank in Abu Dhabi and a Director for Merrill Lynch International Wealth Management in the UAE. He has 19 years of experience in private banking and wealth management.


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The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

Past performance should not be taken as a guide to future performance.

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