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Weekly Investment Update

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Summary

Nicola Dransfield gives a market update and looks at the opportunities available in emerging market debt

3 min read

In this week’s investment update, Nicola Dransfield discusses the Coutts view on central bank commentary and what this could mean for investors, and touches on one of the Coutts 2017 opportunities. 

“Our positioning includes exposure to emerging market debt via specialist third-party funds which have in-depth, local market knowledge. ”
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Our Key Messages This Week are:

Carney’s Speech Strengthens Sterling   

Markets were lower over the week following comments by Mark Carney, Bank of England governor, that a shift away from easy monetary conditions may become appropriate. As a result ten year U.K. gilt yields jumped upwards by more than 20bps (prices fell) and sterling strengthened against the dollar reaching $1.30 by Thursday. Amongst these moves we remain comfortable with our preference for alternative strategies over gilts to provide ballast in our portfolios and funds.

 

An end to QE at the ECB?

ECB president Mario Draghi also spoke last week at the ECB’s annual central banking forum. Draghi hinted that the central bank could start to gradually adjust policy soon. This sparked a fairly dramatic reaction within markets, with 10yr German bund yields rising 12.5bps  to reach almost 37bps on the day(prices fell). The euro also strengthened against the dollar. Despite these moves we continue to expect the ECB to tread carefully and we do not hold the view that these comments pose a risk to our positions in European equities.    

 

Emerging Markets Debt Delivers

As developed markets continue to post positive trends in growth so do emerging markets. While we have seen some stabilisation in China more recently as the government works to reign in credit growth, we see this as a relatively well managed process and we do not believe there is a cause for concern at the moment.  

Our positioning includes exposure to emerging market debt via specialist third-party funds which have in-depth, local market knowledge. As an example of returns, one of our emerging market bond funds has generated a return of 6.5% since we invested earlier this year.

Where we choose to invest using third party funds, we follow a rigorous due diligence process. We apply our expertise to select only the best in class funds which are not only able to achieve competitive returns but who also employ the same disciplined and well researched approach inherent within our own investment principles. 

Coutts Investments

With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.

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