Mandatum Life Allocation portfolio management – March
Mandatum Life Allocation basket returns were between +0.6 % and +1.4 % in March.
During March, we have gradually increased the equity weight. Over the past six months, companies’ earnings forecasts have been adjusted clearly downwards but the fall in forecasts is now ceasing. Driving this is especially the levelling out of US tech companies’ earnings forecasts and their coming to rest at a more realistic level. In fixed income investments, the focus is on Nordic corporate bonds, in which we still see good return potential. We have also slightly increased continental European corporate bonds. In continental Europe, the return level is attractive compared to the US, taking the currency hedging cost into account. Due to the low return level, we underweight European government bonds, in particular. Building the portfolio has proceeded according to plan and alternative investments have mitigated the price volatility of the investment portfolios, as we expected them to. We did not make any new investments in March.
While the growth outlook for the global economy is good, growth is expected to slow down to around +3.3% in 2019. Statistics and confidence indices describing economic activity have been predominantly weak in the early year. However, in China and the US, PMIs measuring companies’ confidence rose at the start of March, indicating that economic development could be taking a turn for the better. The looser approach adopted by the central banks in their monetary policies has been a key driver for the investments markets in early 2019. The decline in interest rates achieved by the central banks, i.e. the decline in the price of money, reflects positively on the return development of all asset classes. In the US, the Fed is planning to end its balance sheet reduction measures. In Europe, the central bank will keep its key interest rate unchanged at least until the end of the year. China also revealed a stimulus package in January, the first encouraging effects of which are beginning to appear.