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Job Curtis, Portfolio Manager of The City of London Investment Trust, provides an update on the Trust highlighting the key drivers of performance over the month of April, factors currently affecting the market, and outlines recent portfolio activity.
The FTSE 100 Index benefited from its greater exposure to defensive sectors, which are not exposed to the squeeze on consumer spending. For example, the utilities and pharmaceutical sectors were outperformers. Among The City of London’s best performers over the month were its shareholdings in SSE, the utility company, and GlaxoSmithKline, the pharmaceutical company. The oil & gas sector continued to do well with the oil price remaining elevated. The City of London has large shareholdings in Shell and BP but is underweight in them relative to the market average. An addition was made to the portfolio’s smaller position in TotalEnergies, the international oil company headquartered in France.
Inflation is continuing to surprise on the upside in the UK, US, and Europe. Energy and other commodity prices are a factor as is general supply side disruption. Against this background and tight labour markets, wage inflation is picking up. The Bank of England has raised the bank rate to 1.0% but further interest rate increases are needed because monetary conditions are still too loose.
In general, companies have reported satisfactory first quarter results. Going forward, the extent to which companies can cope with inflationary pressure will be a key factor in stock performance. The dividend yield of UK equities remains attractive relative to the main alternatives.
1 Source: Bloomberg as at 30/04/2022