Strategic Growth Portfolio Update - Summer 2018
Second quarter performance analysis for the St. James's Place Strategic Growth Portfolio.
The Strategic Growth Portfolio delivered a healthy return over the quarter, leaving it up for the year despite February’s market correction.
It was a good period for the US economy and jobs, as unemployment struck a fresh low and wages gradually began to rise. Corporate earnings shot up as they absorbed the impact of the White House’s tax reforms package, and the S&P 500 rose by around 3% over the quarter. Consumer confidence and retail sales in the US both ticked upwards, contributing to gains. For investors, these tailwinds appeared to overshadow the protectionist moves undertaken by the US administration, which often had a greater impact on stock markets in other countries.
The North American fund, managed by Aristotle Capital, benefited from these tailwinds but also outperformed the wider market. Good stock selection was an important factor in fund performance. AES Corporation, a global power company based in Virginia, made a major contribution to returns. The company beat the highest analyst estimate for first quarter earnings and the stock price rose almost 20% over the period.
The Global Growth fund, which accounts for a quarter of the Portfolio, benefited from a similar mix of global tailwinds and positive stock selection, contributing to Portfolio performance. The fund, which is co-managed by Edgepoint, Sands Capital, Select Equity and Magellan, made gains based in part on its strong weighting to the IT sector, which recorded strong returns across the quarter. Sands Capital, for example, benefited significantly from a holding in Netflix, the online streaming channel, which enjoyed a particularly strong quarter on the back of rising subscriber numbers. The company even overtook Disney as the largest media-only stock listing worldwide.
The Japan fund produced positive returns over the period, benefiting from its allocation to Shinko Plantech, an energy company, which rebounded on markets after a difficult first quarter in which a lawsuit was filed against the company.
Across Europe, market sentiment was buffeted by a range of political events and economic figures. Slowing growth and the formation of a populist coalition government in Italy weighed on sentiment, but the French president’s progress in making domestic reforms and in beginning to push eurozone reforms appeared to balance out the negatives. The Greater European Progressive fund also contributed to Portfolio performance; a notable performer was Micro Focus, a UK-listed IT company.
The price of funds and the income from them may go down as well as up. You may get back less than the amount invested.
Portfolio fund allocations are not rebalanced automatically. Thus Client Portfolios may not include all of the stocks mentioned in the commentary, as fund allocations may vary between clients, leading to different investment experiences.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.
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