Q2 – 2015
The second quarter (Q2) saw the domestic equity market fall 2.8% while the market for government bonds fell 2.6% in value. A portfolio composed of 60% equities and 40% bonds finished the quarter 2.6% lower.
Index | 1 year | 3 years | 10 years | Low Point | Greatest Loss |
---|---|---|---|---|---|
FTSE100 | 0.2% | 9.2% | 6.3% | Feb 2009 | -39.8% |
FTSE Gilts (5-15years) | 7.4% | 2.1% | 5.6% | Dec 2013 | -6.7% |
60-40 Portfolio | 3.2% | 6.5% | 6.3% | Feb 2009 | -20.4% |
LIBOR (3 months) | 0.6% | 0.6% | 2.3% | ||
Consumer Price Index | 0.3% | 1.5% | 2.5% | ||
Taking a longer term view, and given a minimum of 7 years for investment, we look for returns from the FTSE 100 Index to lie somewhere between 6.9% and 10.1% per annum. The most recent decade (from 30 June 2005 to 30 June 2015) is characterised by a return of 6.3%, outside of the lower end of our range. That makes good sense when one considers that the starting and ending points in that period coincide with a maturing bull market in 2005 and some volatility today.
Our hypothetical 60-40 portfolio, comprising 60% in the FTSE 100 Index and 40% in the FTSE Gilts (5-15 years) Index, has gained 3.2% over the last 12 months, 6.5% p.a. in the last 3 years and 6.3% p.a. over the 10 year period. Adjusting those figures for inflation gives us a healthy set of real returns of 2.9%., 4.9% p.a., and 3.7% p.a. respectively.
Those positive inflation-adjusted returns are particularly pleasing when we consider that cash investments have, somewhat unusually, lost ground relative to inflation – a result of 6 years of unprecedented monetary easing.
The last year is characterised by a mixed set of results with the US and Japan performing strongly. Meanwhile relatively low returns have been provided by markets in Asia, Europe and developing world.
Steve Williams
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