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LCP Investment Summary - May 2018

Posted on 1 June, 2018 by Administrator

LCP Investment Summary - May 2018

Global equity markets rose 4.5% (in € terms) during May, helped by the strength of the U.S. dollar against the Euro.

Equity markets rose during the first half of month, supported by generally solid corporate and economic data, but investors then got nervous over the deteriorating political situations in both Italy and Spain, with the prospect of further elections in Italy being seen potentially as a de facto referendum on euro membership although an agreement late in the month between the Five Star Movement and League seems to have averted further elections for the moment.

And not for the first time, President Trump swayed markets with his stance on North Korea (cancelling his planned June summit meeting with Kim Jong Un), China (initially saying that a possible trade war was ‘on hold’ but then a week later announcing that the U.S. would proceed with tariffs of $50bn on Chinese imports) and then the EU/Canada/Mexico on the last day of the month (to impose tariffs on steel and aluminium imports, starting today 1st June).

Eurozone equities fell 0.7% in May, with North American equities up 7.3% (€ terms).

Bonds

Longer-dated Eurozone bond prices rose 3.9% in May, with the yield on the AAA Eurozone 15+ Year Index falling to 0.88% by month end. The Euro Broad Sovereign 10+ Year Index fell 1.7% with its yield rising to 1.69%.

Prices for longer AAA-rated bond prices rose strongly (with yields falling) as a result of a ‘flight to quality’ following the situation in Italy mid-month and the possible implications for both the currency and the region. Stronger inflation data at month end saw longer yields rise somewhat. Italian, and other peripheral, bond prices fell sharply over fears that new government proposals could threaten Italy’s credit rating

Sample DB Scheme

The funding level of our sample DB scheme rose to 98.0%, as its assets rose by more than its liabilities (calculated using a MFS proxy) over the month.

Sample DC Schemes

All three of our sample DC schemes rose in May with most asset classes rising over the month.

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