The Trust produced a Net Asset Value (NAV) total return of -4.7% during the month and a price total return of -4.5%, compared to a return of -3.7% for the FTSE All-Share Index (TR). The resilience shown by the portfolio since the market peak in the summer was severely tested by the market fluctuations in December. This led to a disappointing outcome for the final month of the year. 2018 also represented the first negative calendar year return for the Trust since Troy’s appointment shortly after the Global Financial Crisis of 2018. The Trust’s NAV return placed it 3rd out of the 20 trusts in the peer group over the twelve months in what was a very difficult year for UK Equity Income managers generally (Source: Numis).
Negative sentiment pervaded global markets as weaker growth in China and Europe became more apparent. In the US the Federal Reserve meeting (held just before Christmas) prompted a more hawkish message about further interest rate rises than the market had been expecting. This triggered a sharp fall in US equities which was only partially reversed by the month end. The -9.0% US dollar return for the S&P 500 was in fact the worst December since 1931.
At moments like this it is important not to be overwhelmed by the cacophony of noise and uncertainty surrounding markets and to remain focussed on the valuations of individual companies which are, in many cases, at multi-year lows. In twelve months’ time at least some of the challenges surrounding Brexit and the normalisation of interest rates should have been resolved. Although there may well be significant volatility in the interim we would not be surprised to see positive returns in 2019.