‘The cloud never comes from the quarter of the horizon from which we watch for it’ – Elizabeth Gaskell

A new quarter starts…and a new pessimism starts? Early equity market moves on first July were generally down driven by further twists and issues in the Brexit, world trade and German domestic political angst debates. But despite all of this, at least in the UK, the local market has enjoyed its best three month showing since the first quarter of 2013. This sounds consistent with our previous observations that the UK stock market’s low level of positive sentiment offered appreciation potential.

And scrape below the surface and there is a lot happening beyond headline market levels. In stock market terms it is generally called rotation or, to put it more simply, a shift from a preference (and performance) of one type of company to another. In the UK market the most compelling rotation shift remains the scope for more domestic shares to surprise investors. Certainly it is hard to argue with the conclusions of a Deloitte CFO survey which shows 75% of major UK firms think Brexit will hurt business environment (previously 68%) but as the second quarter’s performance shows…the darkest hour is often before the dawn, even if the political environment around Brexit remains very complex and mixed-up. .

We took the opportunity during the last week to make a few portfolio changes to the Dynamic Opportunities Fund. We took some profits in our holding in the American oil and gas explorer Apache which has benefted from the rising oil price and a growing appreciation of its range of development assets in North America. We also reduced our holding in Centrica.

Meanwhile we introduced a new position in the American spirits company Brown-Forman, owner and distributor of the iconic Jack Daniels brand. Brown-Forman shares have been under pressure due to potential extra tariff threats from the European Union in retaliation to new American tariffs. This feels horribly problematic but strong brands – such as those owned by Brown-Forman – have the capability to offset tariff-induced price increases.

Additionally we also took the opportunity to add to our holdings in both the London-listed gold miner Polymetal after a positive operational update and the diversified Singapore-listed Asian conglomerate Jardine Matheson which continues to trade at a 10% discount to book value.