Ivy Global Equity Income Fund

Ivy Global Equity Income Fund

Market Sector Update

  • Across the globe, markets continued to perform well as conviction of continued solid global gross domestic product (GDP) growth was in line with investors’ expectations. We believe recent U.S. legislation progress, including the passing of large tax cuts for corporations and individuals to aid capital expenditure and consumer spending, should benefit the economy in 2018. In U.S. dollar terms and in order, Asia, the U.S. and Europe performed well.
  • European political uncertainty has been less of an ongoing issue, while investors have seen the benefits of higher GDP growth via stronger earnings-per-share growth. In France, pro-business reformer Emmanuel Macron pushed through labor reforms, and in Germany, Chancellor Merkel has struggled to form a government with partners that will be more pro-European Union reform.
  • The U.S. dollar continued to relinquish its past gains over the quarter, losing approximately 3% versus a basket of other currencies.
  • During the quarter, the U.S. Federal Reserve (Fed) expectedly raised rates and indicated they plan on three additional rate increases in 2018, which is slightly more than the market has priced in. The Fed has stated they will slowly unwind its multi-trillion-dollar balance sheet. Unemployment continues to fall, and the economic outlook is strong for 2018, with both consumer and business confidence remaining high during the quarter.
  • The European Central Bank (ECB) does not plan to lower rates further, and has focused its attention on getting the banking system fit to handle any additional shocks. The ECB will begin to taper its bond purchases in early 2018. The ECB’s current focus is forcing more capital into weaker Italian, German, Spanish and Greek banks.
  • Global purchasing managers’ indices marginally improved during the quarter. Emerging-market growth has improved, and we believe will aid sales and earnings for multinational and emerging-market companies. We believe this will continue to improve in 2018, and will be more inflationary for the overall global economy.

Portfolio Strategy

  • The Fund is positioned for reflation and cyclical recovery. The Fund outperformed the benchmark (before the effects of sales charges) driven primarily from strong sector allocation. An overweight allocation to the strong performing information technology sector was the top relative contributor.
  • Stock selection slightly detracted to performance, as poor selection within consumer staples, information technology and materials more than offset relative gains from the energy and health care sectors. Regional allocation hurt performance this quarter as the U.S. outperformed, while the Fund remained overweight European markets. Stock selection in North America and Europe was strong and offset the regional allocation detraction.
  • The use of currency hedges to the U.S. dollar slightly detracted, as the euro, British pound and Japanese yen strengthened. The Fund maintains hedges to a portion of the euro and yen exposure.
  • As the quarter progressed, we increased exposure to telecommunication services and industrials, while decreasing exposure to consumer staples and financials.
  • The Fund’s largest sector overweights continue to include information technology where we are targeting higher growth; financials where we continue to find companies we believe provide good dividend yield, recovery potential (higher rates) and/or growth prospects; and energy where we believe dividend yields remain attractive. In our view, our underweight allocation to consumer staples has poor fundamentals and/or high relative valuations.
  • Over the quarter, the Fund increased exposure to Europe at the expense of U.S. information technology and consumer staples. We have maintained the Fund’s overweight allocation to Europe, as we believe European political fears will continue to subside over the next few years, which should bode well for the region and increase investor interest. In addition, we are finding attractive global names in Europe and Asia that we believe provide a better risk/return and dividend profile.


  • We think global economic growth will remain moderate but will pick up as we move into 2018. We expect the U.S., Europe, China and other parts of emerging markets to be the main engines of growth. We feel the U.K. faces additional headwinds stemming from Brexit, as unknowns and the likely volatility will hurt its economy. The U.K. consumer savings rate is at a 20-year low and inflation has picked up.
  • We anticipate moderate earnings growth, relatively high valuations and a market environment with continued political and macroeconomic uncertainty in the U.S., Europe and Asia. Nevertheless, bonds are becoming less attractive relative to equities and we believe this trend will continue if global inflation reaccelerates. We expect the Fed to enact additional rate increases in 2018 and continue to shrink its balance sheet as planned.
  • Currently, China is in a steady growth pattern with private sector spending offsetting some slowing of public spending. Besides GDP, the government is concerned about housing price rises (affordable housing) and controlling pollution. We believe any economic slowdown will be countered by other fiscal or monetary easing.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through December 31, 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Dividend-paying investments may not experience the same price appreciation as non-dividend paying instruments. Dividend-paying companies may choose to not pay a dividend or the dividend may be less than expected.These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.