The following is an extract from one of our favoured fund managers’ Q1 summary.
March was a strong month in terms of performance as the rally from February continued. This was driven primarily by the quelling of fears of a global slowdown and a promising recovery of the oil price to $40. The Balanced model portfolio was up over 1.6% for the month, with every holding returning positive performance over the period.
Later this month the Bank of Japan will meet to decide whether they will embark on an extension to their current QE programme. The announcement this month is perhaps more pertinent than previous sessions because the inflation data will be announced just 3 ½ hours before the Bank of Japan meet. The financial press over the past week have been very bearish on Japanese inflation figures, reporting that the Bank of Japan are considering inflation expectation downgrades and that Japanese companies do not believe that the central bank will hit its 2% inflation goal by 2021. According to the B of J’s latest economic “Tankan” survey, which measures business confidence in Japan’s manufacturing sector, conditions are at their worst since the early days of Abenomics in 2013.
The B of J Governor Kuroda has cited the rises in the Yen as the reason the weakness in exports and output, adding that he is watching forex moves carefully. The Japanese Finance minister has recently announced that the government are planning to front-load budget spending for the current fiscal year from April.
Last month we sold our exposure in Japanese equities as we do not believe Abe’s three arrows are having the level of desired effect in stimulating economic growth and continue to support the stock market. The funds have been reallocated to the US; in the higher risk portfolios this has been invested in US mid cap equities and in the lower risk portfolios this has been invested in US large cap equities.
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