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LCP Investment Summary - April 2018
Posted on 4 May, 2018 by Administrator
Global equities rose 2.9% (in € terms) during April, recovering some of the losses of the previous two months.
At the start of April, investors remained concerned over issues with some technology stocks and also the threat of a global trade war which continued to simmer in the background. Fears that the threat of potential U.S. air strikes on Syria could lead to an even more serious situation involving Russia receded after it became apparent that the air strikes would be just one-offs for the moment.
As these concerns receded mid-month, investors got back to focusing on more mundane matters like the release of Q1 corporate earnings which were generally ahead of expectations in both Europe and the U.S. However the positive mood was tempered somewhat as U.S.10-year bond yields rose to over 3% for the first time since 2014. Higher yields typically weigh on equities as bonds start to offer a greater yield than equities and they also push up borrowing costs for companies.
Eurozone equities rose 5.2% in April, and North American equities rose 2.3% (in € terms).
Longer-dated Eurozone bond prices fell 1.2% in April, with the yield on the AAA Eurozone 15+ Year Index rising to 1.09% by month end. The Euro Broad Sovereign 10+ Year Index fell 0.8% with its yield rising to 1.60%.
More muted economic and inflation data in the Eurozone kept yields flat for most of the month, but they then moved higher towards month-end following the rise in U.S. Treasuries over the psychologically important 3% yield (for 10 year bonds).
Sample DB Scheme
The funding level of our sample DB scheme rose to 96.5%, 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 April but the Pension Purchase Strategy fell due to its high allocation to longer-dated eurozone government bonds.
Market Performance to 30th April 2018