May 2017 Performance
The latest opinion polls in the UK indicate that the average gap between the Conservative and Labour parties has narrowed to less than 10 points. This is not a surprise given the size of the lead that the Tories allegedly had prior to announcing the snap general election, but Theresa May will certainly be concerned with the notoriously unpredictable polls. The Conservatives are in a commanding position across much of the country and the opposition parties continue to lack strong leadership and credible policies. The chances of a hung parliament are remote and the odds still favour an enlarged majority for the Prime Minister on the 8th of June. The UK equity markets are looking beyond the “white noise” created by the pollsters and are pricing in a strong set of cards for the UK in the upcoming Brexit negotiations. The global recovery in the mining and energy sectors drove the FTSE 100 up 4.39% to a new high of 7,585 and the FTSE 250 climbed 1.82%. Sterling was marginally lower versus the US dollar and fell -3.49% against the euro following Emmanuel Macron’s victory over Marine Le Pen in the French presidential election. Donald Trump continues to court controversy on a number of fronts. This has become the new pattern in US politics and is increasingly ignored by investors. The S&P 500 rose 1.16% and the NASDAQ reached a record high of 5,809. The MSCI World gained 1.78%, but trading in commodity markets was subdued as the GSCI declined -1.57%. The price of WTI oil fell -2.05% and closed at $48.32 per barrel. Ten-year gilt yields fell -3.5 basis points to 1.05%. The UK bond markets offer little value to investors given the recent increase in inflation to 2.70%. History suggests that periods of negative real yields tend to be short-lived, which explains our over-weight position in the front end of the yield curve.