The strong performance of our World Stars Global Equity strategy has vindicated our view that the US and European economies would continue to be resilient and that the ongoing strength of public and private investment as well as consumer spending would continue to drive growth. At the same time we thought that inflation would persist and interest rates would remain at higher levels after the overshoot of last year.
As we note below, market expectations have been adjusting to the US Fed’s guidance of ‘higher for longer’ on interest rates. This time last year we cautioned that the strength of the US economy could mean that interest rates would not be cut as much as markets expected and that this could lead to volatility. This was the reason for the market sell off in the third and fourth quarter last year and was an opportunity for us to buy high quality companies at lower prices. History rhymes but does not usually repeat. However, our view is similar: Markets may have to face the reality that growth and inflation mean that current interest rates are appropriate for the US and global economy and that any volatility around adjustment of market expectations will be an opportunity this year as it was last.
We invest in companies that have high quality and that can compound over long periods of time. Engagement with these companies is of great importance to us and we have had several opportunities to do so in different ways during the first quarter of this year.
This month we spoke at the annual meeting of Sika to express our support for the election of the new chair Thierry Vanlancker and our thanks for the outgoing chair Peter Hälg after 12 successful years. We supported Sika’s board and management in their battle against the a hostile takeover by Saint Gobain and are extremely pleased to have helped Sika stay an independent and successful company. It is a leader in material technology for construction and other industries and one of the key solution providers for the more sustainable less carbon intensive renewal of public and private assets.
This time of year is also when we prepare to vote in the shareholder meetings of the companies that we have invested in. In his annual letter, JP Morgan’s CEO Jamie Dimon this year commented on the way JP Morgan Asset Management is looking to improve its approach to proxy voting by relying less on the inputs of the proxy advisors and placing more emphasis on decisions taken by their own portfolio managers and investment analysts. This has always been our approach. We review the proxy statements and any shareholder votes with the investment analyst taking the lead supported by our ESG analyst, and then discuss the proxy statement and our voting recommendations with the investment team before deciding how to vote.
