April has continued the theme of 2014 with another turbulent month for markets. Developed economies have continued to struggle this month in response to a number of factors, most notably the situation in Ukraine. Valuations have continued to slide across the board from their February peaks with Japanese, Chinese and American markets all down for this month. The FTSE 100 has been able to buck the trend somewhat but this has been driven more by speculation surrounding the pharmaceutical sector and takeover activity going on with AstraZeneca and Pfizer, than by a general upward trend.
The US small companies sector has been hit the worst. There has been a big sell off across smaller technology companies as investors have grown wary of the high valuations these companies are trading at compared to their earnings. Companies like Google and Facebook were the big names to suffer but the small bio-tech companies suffered the worst, the sector down over 17% for the month.
Emerging markets have stood up relatively well by comparison, vindicating our decision to increase exposure there. There has been an encouraging reaction to reform proposals put out by the Chinese government and the fact that valuations are at such low levels already has helped.
Our corporate bonds and property exposure have also served us well this month and helped to restrict some of the losses from the stock market. Those with more cautious portfolios will have benefited most from this but we have increased our commercial property exposure across the board in an attempt to de-risk the portfolios and reduce volatility.
Despite the recent poor performance of equities we remain optimistic about the prospects for the rest of the year. The economic outlook is continuing to improve and we are confident that this will translate into improved earnings. Our approach at the moment is to sit tight and hold true on the fundamentals, rather than move in response to short term problems.