Trustnet Magazine 51 May 2019

Advertorial feature slump and a dramatic one at that, but I don’t buy that. I don’t see a a fairly slim chance of unfolding into recession coming in the US but I’m an all-out trade war and altering our also struggling to see how it gets any view of the world. better. The second and third scenarios This brings me back to the central relate to the US economy, which grew view we hold at Bankers, for which at an impressive rate last year relative I give about a 50% likelihood of to the rest of the world. There is a playing out this year. In this scenario, danger that the US central bank, the the long business cycle continues Federal Reserve, has ‘left the taps with the ongoing global economic open’ a bit too long. By that I mean slowdown bottoming in the summer the economy is in some danger of months before picking up gradually overheating and may need action in the latter part of the year. It might from the Fed in the form of steeper sound a bit dull but it’s not a bad interest rate hikes, but I think that’s world to be in and it’s one we can unlikely. position ourselves for. In equal measure, the US economy could slump if the Fed has overdone QT favours value it with its incremental interest Our belief at Bankers is that there is rate hikes over the past two years. probably going to be a shift towards Personally, I don’t think the the end of 2019 with value stocks banking system has been lending beginning to outperform against aggressively so I discount this risk, growth. This could be even more but the tools to get another recovery likely if central banks extend their going are relatively limited from tightening measures, colloquially here, so we should be careful about known as quantitative tightening this scenario. (QT), which in simple terms refers to The US is still the single most a number of monetary policy actions dominant economy in the world and that aim to normalise interest rates the largest market in stock market and mitigate rising inflation. The US terms. The Federal Reserve in the Federal Reserve has indicated it has US has maintained a loose monetary paused its increases in interest rates policy stance in recent years but but a resumption in global growth it’s probably as good as it’s going to could mean a reversal of this policy. get. There are worries that there we QT would mark a significant shift will shortly witness a US economic from the past 10 years during which FE TRUSTNET [ JANUS HENDERSON ] 26 / 27 “There are worries that there we will shortly witness a US economic slump and a dramatic one at that, but I don’t buy that. I don’t see a recession coming in the US but I’m also struggling to see how it gets any better” central banks dominated asset prices by driving down the cost of long- term money to support businesses and keep employment high. Once quantitative tightening measures begin to roll out and money becomes more expensive, there will be a shift in market sentiment. We are positioning the Bankers portfolio to benefit in this scenario, while also maintaining a healthy balance and diversification across styles, sectors and geographies. We are overweight relative to the benchmark on consumer goods and services because we think the very low levels of unemployment will be persistent and wage growth will pick up in the US and UK, as it has in Asia and China. All in all, I am of the belief that the global economy is not broken and the future is bright. Without a significant trigger I don’t see a dramatic recession coming but rather a gradual contraction and subsequent expansion towards the end of the year. Once we get some clarity on the macroeconomic and political questions hanging over markets, it’s quite probable confidence will be restored and some of the fantastic value opportunities of today will be gone. • Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. • Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). [Janus Henderson, Janus, Henderson, Perkins, Intech, Alphagen, VelocityShares, Knowledge. Shared and Knowledge Labs] are trademarks of Janus Henderson Group plc or one of its subsidiaries. © Janus Henderson Group plc. trustnet.com

Trustnet Magazine 51 May 2019 | Page 26