Global Investments
International Limited

This Monthly Investment Bulletin should be read in conjunction with the principal brochure(s) for the relevant product(s). Please refer to 'Important information' at the end of the bulletin.

Robust outlook tainted by weak consumer
The UK equity market's winter rally came to a halt in March. A further sharp rise in the oil price, a disappointingly neutral budget and a raft of negative trading statements from retailers caused the FTSE All-Share Index to fall 2.7% in US dollar terms. Investors should find comfort, however, from sustained merger and acquisition activity and the prospect of domestic interest rates remaining lower for longer. In the current climate we are looking to raise our exposure to defensive growth companies.

Rate fears compound cautious view
After a bright start on the back of encouraging employment data, the S&P 500 Index fell 1.8% in US dollar terms in March. Towards the month-end, investor sentiment was undermined by hawkish statements on interest rates by the US Federal Reserve and we responded by reducing exposure to selected consumer-facing stocks. As equity valuations are only reasonable at best, we currently see better value opportunities in other markets. We therefore remain underweight the US.

Disappointing data nips back rally
Downgrades to economic growth for the eurozone created an unhelpful backdrop for the equity market. In March, the FTSE World Europe (ex-UK) Index eased back 2.3% in US dollar terms. Company earnings nevertheless remain robust and there is scope for further improvements. While a measure of political uncertainty has emerged in the form of the collapsing Stability Pact and a possible French rejection of the EU constitution, we are optimistic that current restructuring programmes will create a positive long-term environment for stock market growth.

Risk aversion obscures positive long-term picture
Despite the release of weak data during March, we expect the Japanese economy to show further signs of improvement in the coming months. A gradual return to positive inflation, improving corporate profitability, bubbling merger and acquisition activity and cheap valuations all augur well for further positive stock market performance. A reduction in risk appetite globally in March pushed the Asian stocks lower, although the region was buoyed by further strong retail and industrial production data from China.

The cloud of inflation looms on the horizon
The JP Morgan Global Government Bond Index ended March 1.2% lower in US dollar terms as the US Federal Reserve indicated that interest rates may have to rise more quickly in order to tackle inflationary pressures. Concerns over a deterioration in the economic outlook continued to weaken sentiment towards higher yielding bonds and we pared back our exposure further. Elsewhere, we tempered our positive view of emerging market bonds due to the imminent unwinding of the so-called 'carry trade'.

Dividends declared in the past are not necessarily a guide to the future. The guaranteed investment returns are the current returns available to investors holding the funds for the required term. The guaranteed investment returns are declared in the year of the investment and only apply in respect of the first 10 years of your investment or until the maturity date, if earlier. The interim and bonus dividend credited during the period from policy commencement to the 10th policy anniversary or maturity date if earlier will not be less than the guaranteed investment returns. For full details of the terms and conditions governing the Guaranteed Accumulation funds, please refer to the 'Investments -Your guide' booklet, a copy of which is available on request. The guarantor is Zurich International Life Limited.

Source: Zurich International. Figures based on bid prices on the 1st day of each month.
Note: Past performance for all our funds is not necessarily a guide to future performance.