Investing into a more challenging environment

Advertisement feature There are risks for investors in the current geopolitical  environment, says Simon Gergel of the Merchants Trust. But these risks have also created investment opportunities.

Simon Gergel, Portfolio Manager - The Merchants Trust PLC

Risk and opportunity are two sides of the same coin. There are risks for investors in the current geopolitical environment but these risks have also created investment opportunities. Risks include the potential impact of Brexit, the rise of anti-establishment movements across much of Europe, trade tensions between the USA and China, and a gradual tightening of monetary policy, especially in the USA.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Here in the UK, the economic outlook is uncertain. After a decade of expansion since the financial crisis, and considering the risks listed above, the rate of economic growth could slow, perhaps sharply, and there have been some recent signs of weaker activity. However, it is also noteworthy that the recovery since the last recession has been relatively muted, wages are only now starting to accelerate above the cost of living, and there is pent up demand, as Brexit uncertainty has put some investment and spending plans on hold. A lifting of the Brexit fog, and some resolution to the US/China trade spat, could lead to a re-acceleration of economic growth.

Stock markets are also sending mixed signals. UK Equity returns over the last decade have been extremely strong, yet the FTSE 100 Index of leading shares is broadly where it was 20 years ago. UK shares are especially cheap compared to other major world stock markets, largely due to investor nervousness over Brexit. In our view, this represents a particular opportunity, especially as some two thirds of UK listed companies' sales and profits comes from abroad. Within the stock market, valuations are polarised, with domestically exposed stocks depressed, whilst many higher growth or defensive, international earners seem fully or over-valued.

Advertisement
Advertisement - Article continues below

This is a good environment for active investors like ourselves. At The Merchants Trust, we invest in around 45 higher yielding, large UK companies in a risk-diversified portfolio. Our investment philosophy is to seek to buy sound companies when they are under-priced in the stock market, in order to deliver a high income stream and above-average total returns to our investors.

The Trust was established in 1889 so celebrates its 130th anniversary this year. Short-term external setbacks have always challenged the company over its lifespan but it has succeeded in delivering capital and income returns through good times and bad. That's why, looking ahead, we think it is vital to continue doing what we've always done, confident that good stock opportunities can always be found.

Simon Gergel, Portfolio Manager - The Merchants Trust PLC

To find out more about Simon's investment philosophy visit www.merchantstrust.co.uk

Important information: This is no recommendation or solicitation to buy or sell any particular security. Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested.

This is a marketing communication issued by Allianz Global Investors GmbH, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, D 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt fr Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). The Merchants Trust PLC is incorporated in England and Wales (Company registration no. 28276). Registered Office: 199 Bishopsgate, London, EC3M 3TY.

Advertisement

Recommended

Visit/investments/funds/investment-trusts/600959/if-you-think-now-is-a-good-time-to-buy-look-at-these
Investment trusts

If you think now is a good time to buy, look at these investment trusts

With the latest market slides, an awful lot of assets are beginning to look very cheap indeed. If you are thinking of buying, Merryn Somerset Webb has…
10 Mar 2020
Visit/investments/funds/investment-trusts/600873/how-to-build-a-properly-diversified-investment-trust
Sponsored

How to build a properly diversified investment trust portfolio

Max King explains how to build a well diversified portfolio using one of our favourite tools – investment trusts.
25 Feb 2020
Visit/investments/funds/investment-trusts/600757/why-investment-trusts-are-the-best-vehicle-for-your
Sponsored

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020
Visit/520115/investment-trusts-the-cinderella-of-investment-arrives-at-the-ball
Funds

Investment trusts: the Cinderella of investment arrives at the ball

Investors should look beyond the market noise of a single year and examine the bigger picture. Max King explains what we can learn from 25 years of in…
8 Jan 2020

Most Popular

Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/stockmarkets/601101/has-the-stockmarket-hit-rock-bottom-yet
Stockmarkets

Has the stockmarket hit rock bottom yet?

The world's stockmarkets continue on their wild and disorientating rollercoaster ride. Investors are still gripped by fear. So, asks John Stepek, have…
2 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/investments/commodities/energy/oil/601107/oil-shoots-higher-have-we-seen-the-bottom-for-the-big-oil
Oil

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020