Letter to Shareholders: Value Bonds Q1 2013

It continues to be true that ‘you can’t fight the FED.’ Quantitative easing has worked and we are seeing increasing signs that the US recovery is pulling out of soft ground onto a firmer footing.

House prices are coming in strong, employment figures are encouraging and the US stock market is looking good. The wealth effect is feeding through to US households and their higher expenditure is supporting the recovery. Even the ‘fiscal cliff’ has turned into a less ominous-sounding ‘sequester’, involving budget cuts to particular categories of federal spending. The ‘sequester’ came into effect at end March and could represent a short-term setback. But the overall policy of ‘kicking the can down the road’ is sensible. Aggressive tightening would not be advisable until growth looks sustainable. But sustainable growth is what we anticipate for H2 2013 – in the US and the rest of the world…ex-Europe.

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