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We have reached a potentially pivotal period in terms of the global economic outlook, with ongoing US-China trade tensions leading to downgrades for economic growth forecasts for this year and next. At such times, it is important to maintain perspective and to consider that while growth is slower and less uniform across the world than was anticipated, in the wider picture, global growth is continuing and opportunities for asset growth remain.

As ever, our team are monitoring developments closely while maintaining a long-term approach to generating returns for investors in our funds. In this edition of FundsTalk, we discuss the economic backdrop, specifically the outlook for interest rates, and we also take a closer look at some of the asset classes and underlying funds in which we invest.

Our first article addresses why the outlook for interest rates is considerably different than a year ago, when the US Federal Reserve was set on a path of gradual increases in US interest rates through 2019 and into 2020. At its June meeting, the ‘Fed’ predicted rate cuts ahead and indeed followed through with this in July, which was sooner than generally expected. Meanwhile, other major central banks, including the European Central Bank and Bank of England, look poised to move in order to stimulate their flagging economies.

Macro-economic developments naturally have a bearing on the outlook for both equities and bonds. Our second article looks at the historic correlation between equities and bonds and why it diverged from long-term patterns in 2018, with both asset classes declining in tandem. We discuss equity/bond correlation in the context of how clients can build a resilient diversified investment portfolio.

In the latest in our series of interviews with our external fund managers, Bob Kaynor, Fund Manager of the SW Schroder US Smaller Companies Fund and Head of Schroder US Small & Mid Cap Equities, outlines his investment strategy. There are some parallels to our own approach in the way that Bob and his team manage funds, particularly their disciplined three-pronged approach to investment: understand, scrutinise and analyse – and also their forensic scrutiny of numbers before making key investment decisions.

And finally, property is a distinct asset class that offers an opportunity for diversification within a multi-asset portfolio. Our fourth article looks at different ways to gain exposure to property, via investment in funds which own physical property or via listed property share vehicles known as REITS (Real Estate Investment Trusts). We provide insight into the pros and cons of each approach to property investment.

We hope you enjoy this edition of FundsTalk, and as always, we welcome feedback on content and suggestions for topics you would like us to cover in future.

Iain McGowan

Head of Fund Proposition

Scottish Widows Investment Strategy & Execution

Written by

IAIN MCGOWAN | Head of Fund Proposition

Other articles in this edition


In 2018 something fairly unusual happened: both equities and bonds were down in the same year.


Understand, scrutinise, analyse – conducting rigorous ‘bottom-up’ company analysis for stock selection. 


Property investment is far from a oneway bet.

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