The fund generated a modest positive return over the first quarter of 2019. In a rising market, its short book and low net exposure (c.8%) held it back.

The US market rose by 13.6% in US dollar terms through the first quarter of 2019. Those gains were underpinned by accommodative messaging from the Fed, which lowered its projections for GDP growth and inflation.

The market now expects that the Fed wont raise rates at all this year and only once in 2020. In addition, the tensions between the US and China eased, providing a further boost to sentiment.

TheArtemis Funds (Lux) US Absolute Returnfundgenerated a modest positive return over the quarter. In a rising market, its short book and low net exposure (c.8%) held it back. Our sector positioning, particularly our short position in energy, detracted from returns. Results from our stock selection, meanwhile, were mixed.

Source: Lipper Limited, data from 31 December 2018 to 29 March 2019, mid to mid. All figures show total returns with dividends reinvested. Benchmark is S&P 500.

* Data prior to 7 March 2019 constitutes simulated past performance data as it reflects performance of Artemis US Absolute Return Fund class B accumulation shares USD and EUR hedged respectively (a UK-domiciled fund following the same investment strategy as this fund), and from 7 March 2019 to 29 March 2019 reflects actual past performance for class B accumulation shares USD and EUR hedged respectively of this fund.

On the positive side, our long position in semiconductor stock Xilinx performed well in reaction to a good set of results. We have taken some profits. Our negative stance on financials continued to be supportive. The flattening of the yield curve and late-cycle concerns over lower lending and higher provisions against bad debts weighed on the sector. A short position in a large banking group proved beneficial, as did our long position in index provider MSCI. The technology sector performed solidly and our long positions in stocks such as Microsoft, KLA and Booz Allen Hamilton helped returns.

In healthcare, Zoetis (animal health) continued to do well. But Humana and UnitedHealth (health insurance) gave back some of their earlier gains. Medicare for All is being pushed by the Democrats and, in theory, represents a threat to these companies. This is likely to be a topic of discussion through the election cycle but we believe that the odds of it actually happening are relatively low. We had taken some profits on these names before the setback.

Elsewhere, we have added further to Visa following good fourth-quarter results. We see the potential for further upside as the volume of card payments continues to grow.

While the market is discounting a big pick-up in economic growth, data is still weakening. We would also expect liquidity to deteriorate meaningfully in the second quarter of the year without much greater support from the Fed and other central banks. The market is going to face tough year-on-year comparisons for the first-quarter reporting season as last years numbers were already including the positive impact from tax cuts. While this is more a technical issue rather than a sign of deteriorating fundamentals, negative earnings growth is likely to weigh on the markets sentiment. We expect more volatile conditions ahead.

Stephen has managed Artemis US Extended Alpha and US Absolute Return Funds since launch.

For information about Artemis fund structures and registration status, /fund-structures.

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