Aberdeen Standard

Many investors have historically viewed emerging market (EM) equities as a source of growth, with income a distant consideration. We believe this oversight is a mistake, and that a dividend-focused approach to investing could help boost long-term total returns.

So far, 2018 has been a difficult year for emerging market (EM) assets, which in the last few months have fared significantly worse than their counterparts in developed markets. This has been due mainly to worldwide issues but also country-specific political uncertainty. Many investors are now asking if the sell-off presents a buying opportunity – or are there reasons to remain wary?

It is fair to say that forward guidance doesn’t enjoy a good reputation in the UK. The policy, introduced with some fanfare by Mark Carney on his arrival as Governor of the Bank of England, was meant to give greater clarity about the path of interest rates.

When it comes to Australia, our view within the equities team is one of cautious optimism. What many investors don’t know is that Australia’s economy is heavily reliant on China. In fact, we believe the country’s dependence on China as a trading partner and as a major influence on commodity prices naturally makes China its greatest vulnerability.

Japan has had a sobering 2018 so far, with both growth and inflation coming in below expectations. Is this likely to trigger a policy response, or should we expect more of the same?

2018 has already seen its fair share of surprises. Nearly at the mid-point, we’ve seen a shift (even if temporarily) in US-North Korea relations that was deemed unbelievable just six months ago; the consensus around synchronised global growth has weakened; the US is moving towards protectionism; and the ZTE debacle crushed the myth of world-beating Chinese innovation.

Global equity markets have endured a torrid time in the first few months of 2018. The downturn has reached all regions, as concerns about higher interest rates and a potential trade war between the US and China have escalated. But smaller-cap equities have proven relatively resilient during this turbulent period.

US companies had an excellent beginning to 2018, as shown by their strong first-quarter corporate profits. European businesses, on the other hand, had a less auspicious start, a fact also reflected in their earnings reports. 

Over the past 18 months, the term ‘Goldilocks’ has increasingly been used to describe the global economic climate – neither too ‘hot’ to cause rampant inflation, nor too ‘cold’ to fall into recession.

Seems the cash registers are already ringing in the UK this week. According to consulting firm Brand Finance, Saturday’s royal wedding between Prince Harry and Meghan Markle will boost the UK economy by around £1.05 billion.

The US economic expansion has just become the second longest on record. If it continues beyond mid-2019, it will be number one. Its longevity is probably due to a mixture of circumstances, judgement and luck. The severity of the recession following the global financial crisis (GFC), coupled with the slowness of the subsequent recovery, has played a part. Regulatory reforms to the financial sector, implemented in response to the GFC, may also have contributed. And the fact that the US hasn’t been hit by any shocks of sufficient size to knock it badly off course has certainly helped. But as the economy heads towards that all-time record in 2019, what could bring it back down to earth? And are we capable of predicting the end before it’s upon us?

Under pressure from innovation, demanding clients and Old Father Time, hedge funds face their fair share of challenges. A rapidly evolving environment will spell the end for those who fail to keep pace. But in a Darwinian industry, those who innovate and adapt will ultimately benefit – and so will their clients.

Equity investors enjoyed the spring sunshine this week. The S&P 500 was up 1.4% by Thursday’s close. The FTSE 100 and the FTSE World Europe ex UK indices gained 1.0% and 1.2%, respectively.

Many would say that high street retailing is dead. The reality is that no high streets have truly perished and very few will be completely wiped out. Yet many are undoubtedly shadows of their former selves, most will never be the same again, and relatively few could be considered in fine fettle.

Central government finances and fiscal policy often receive most of the attention, but for many countries, especially emerging markets (EM), local government spending far outweighs the central government.

Ongoing economic strength and tax reform are fuelling corporate profits in the US for companies large and small. Meanwhile, wage growth and rising input costs are putting pressure on margins.

It looks like 2018 is off to a solid start in the Eurozone. After the strong industrial production print for December 2017, growing 5.2% year-on-year, PMI data this week continued to register high levels of growth in the manufacturing sector.

The UK economy continues to show something of a split personality. In manufacturing, conditions look robust, with output having grown by some 5.1% over the past six months in annualised terms.