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Strong earnings put markets on the road to recovery

15 May 2018

Dear investors,

After a rather depressing and volatile first quarter, the markets took their first steps on the road to recovery in April. Europe and the UK were the months biggest winners, with returns of 4.6% and 4.7% respectively. Even if we account for the strong Dollar appreciation (+1.8%) these returns still overshadow those of the United States (+2.2%) and Emerging Markets (+1.3%) by some margin. Emerging Markets in particular lost a significant part of the lead they had built up during the first quarter of 2018.

Yet, on the whole prices trended upwards during the month in all regions. Much like the reported earnings did… In the US the first quarter earnings are showing exceptionally strong momentum: EPS are growing at a pace of 23% and more than 75% of the reporting companies have beaten the analysts’ expectations! Moreover, results that are coming in from Europe show a similar pattern. So, while earnings momentum stocks were April’s biggest winners we concurrently saw an unfavourable rotation out of price momentum and quality stocks.

Vector Navigator (+2.1%) and Flexible (+0.7%) performed slightly below their benchmarks during the month. Yet, over a 5-year period the fund is still easily beats more than 90% of the competition. Flexible is beating 66% of the competition this year and 94% of the competition over a 5-year period.

Kind regards,

Werner, Thierry and Nils