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LCP Investment Summary - January 2018
Posted on 1 February, 2018 by Administrator
Global equity markets rose 2.0% (in € terms) during January.
Eurozone equities rose 3.3%, their best month since last October. Continuing positive global economic and company earnings data initially reassured investors despite the negative impact of the stronger euro on the region’s many exporters. However, equity markets fell towards month-end due to rising global bond yields on the back of stronger emerging economic and inflation data and profit-taking.
North American equities rose 5.3% in $ terms (2.0% in € terms) in January, again hitting all-time highs with investors remaining optimistic that share prices can continue to move higher. The impact of the tax cuts made by President Trump in December improved market sentiment in relation to certain sectors.
There was some profit-taking towards month-end following these sharp gains and also after the US Federal Reserve hinted that there may be more interest rate rises in 2018 than previously expected, if inflationary pressures continue to build on the back of the improving US economy.
Longer-dated eurozone bond prices fell 1.3% in January, with the yield on the AAA Eurozone 15+ Year Index rising to 1.16% by month end. The Euro Broad Sovereign 10+ Year Index was unchanged with its yield at 1.73%.
Yields rose as improving global economic and inflation data led some investors to believe that interest rate rises in 2018 may be more aggressive than expected.
Sample DB Scheme
The funding level of our sample DB scheme rose to 98.5%, as its assets rose and its liabilities (calculated using a MFS proxy) fell over the month.
Sample DC Schemes
The High and Medium Risk Strategies rose in January but the Pension Purchase Strategy fell due to its high allocation to longer-dated Eurozone government bonds.
Market Performance to 31st January 2018