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No white flag from the White House - trade war looms



Trump’s trade stance creates more questions than answers but we ask if it’s time for our investment clients to take action.

2 min read

Awards success highlights the wealth of our services

Coutts has won best Total Wealth Solutions Provider – High Net Worth at the prestigious Private Asset Management (PAM) Awards. These awards are the most highly regarded in the wealth management industry and are judged by a panel of industry experts.

The judges singled out the strength of our banking capabilities, our investment service and the way we were able to help clients understand their needs.

This award recognises that Coutts is much more than a bank. While we have our roots in three hundred years of banking excellence, we continue to innovate and adapt our offering to help our clients prepare for the world of tomorrow.

Dylan Williams, managing director at Coutts, commented: "It was a real honour to collect this award. We won against a strong short list from within the wealth management sector, and we were also shortlisted for our cautious portfolios.”

Trump’s trade war

President Trump’s trade tariffs may be preoccupying investors this week but the measures announced so far look unlikely to cause major economic problems.

The tariffs on steel and aluminium imports look like the opening salvo in a trade war with China, something Mr Trump has been threatening since his 2016 election campaign. While there’s been a lot of debate about what action he might take, the measures announced are actually fairly low calibre, certainly relative to the ammunition he might have used.

Aluminium and steel make up only a small component of Chinese exports to the US. While aluminium imports to the US from China have risen in 2018, steel imports fell nearly a third in the first two months of the year as China took steps to scale back steel production.

In fact, the chief victims of tariffs would be Mexico and Canada had Mr Trump’s order not provided an exemption for those nations. European trading partners could also be affected, and the European Commission has said it would retaliate with tariffs on US bourbon, peanut butter and orange juice unless they too are exempted, but these are also fairly low-level responses that shouldn’t be overly disruptive for world trade.

If a full-blown trade war were to happen, although not our base case, we would look to fundamental data to guide our decisions. In these circumstances, maintaining a well-diversified portfolio run by experienced specialists, with access to the latest research and data, is the best way to preserve investments.

“Aluminium and steel make up only a small component of Chinese exports to the US.”

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With friends like Spotify, who needs NME?

Music streaming service Spotify has announced plans to launch an IPO recently, while printed music magazine NME has said it is closing its print edition after 66 years. This shows how changing technologies have the power to disrupt familiar areas of our lives – one of the reasons why technology is such an important sector to monitor.

NME will continue as an online brand – for now – while Spotify is leveraging the power of the digital world to deliver an experience music fans could not have imagined in the days of Pink Floyd and punk.

The global technology sector, as measured by the MSCI World Tech Index, was up almost 37% in 2017 and this growth looks set to continue. It’s already up by over 8% so far this year.

The same major trends that drove 2017’s performance remain key drivers now – they include artificial intelligence, autonomous vehicles and cloud computing.

We have direct exposure to the sector with a number of technology companies included in our Global 30 portfolio of direct equity investments, and indirect exposure through several of our funds.

With strong growth, good earnings and long-term trends around the increasing role of technology in our lives, this sector is likely to remain a preferred theme of ours for a while yet.

Coutts big seven serve clients well

Within Coutts portfolios and funds the seven key themes that underpin our investment strategy have all continued to deliver positive returns compared to their broader markets so far this year. They have also been a core element of the overall investment performance our clients have experienced so far in 2018.

We identified the themes at the start of last year as having the potential for attractive long-term returns and we continue to hold conviction in them:

  • Short-dated bonds 
  • Financial credit
  • European equities
  • Global healthcare
  • Technology
  • Alternative investments
  • Emerging debt

In addition to technology, global healthcare and alternative investments are also worthy of particular note:

  • Global healthcare – in our view the sector remains inexpensive by long-term standards and continues to deliver healthy earnings growth which investors haven’t yet appreciated fully. 
  • Alternative investments – we still believe strategies, such as those focused on absolute returns, provide a good source of diversification to equities in the current environment when government bonds have limited appeal. They help to provide ballast, particularly as we see volatility beginning to return to more normal levels.

In addition, we also continue to like sterling. The pound looks attractive by long-term standards and remains at the low end of its 40-year valuation range. We expect it to recover further against major currencies.

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

About 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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