Manager's Monthly Report

The Trust produced a Net Asset Value total return of -2.9% during the month and a price total return of -3.1%, compared to a return of -5.2% for the FTSE All-Share Index (TR). This was a torrid month for equities worldwide – in fact the worst one-month decline since May 2012.

As is often the case in such market setbacks, more volatile small and mid-cap stocks led the market fall whereas more defensive companies held up well. This played to the Trust’s strengths. Concerns that rising US interest rates might choke off economic growth were the main factor which precipitated the market weakness. Disappointing results from both Amazon and Alphabet further exacerbated the declines and a number of companies pointed towards a more challenging 2019.

In the UK the Budget was held in October. The OBR 2018 GDP growth forecasts were downgraded slightly to 1.3% but future year forecasts were upgraded, allowing the Chancellor the flexibility to flag the ending of austerity. However, the Brexit process continues to dominate Parliament and the risk of a ‘No Deal’ outcome is becoming a greater probability. This would undoubtedly increase both market and currency volatility.

Within the portfolio the most resilient performers like National Grid and AstraZeneca held up particularly well while the worst offenders were Royal Mail, Equiniti and Schroders.

Despite political and economic uncertainty the Trust’s yield of 3.5% continues to provide support.


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