Weekly Notes – Page 14 – Raymond James, Barbican

The Week In Markets – 26th March – 1st April

April 1, 2022April 1, 2022

Today marks the start of April and with it many will be playing pranks on their friends and relatives in reference to April Fools Day. Looking back over this past week, rampant European inflation data has left the European Central Bank (ECB) looking rather foolish.

German inflation came in at 7.6% this week and Spanish inflation surprised at 9.8%, a multi-decade high. So far, the ECB has been behind the curve with regards to inflation, but this week’s data is going to put more pressure on them to act and raise interest rates in an effort to curb inflation. The bond market reaction this week has begun to price in a shifting in ECB policy with bond yields rising across the board. The yield on the 2-year German bund turned positive for the first time since 2014 while the 10-year yield on Italian government bonds is now through 2%. One of the contributors to inflation is the war in Ukraine, which has pushed commodity prices higher. The war has also had the effect of knocking consumer and business confidence which will cause growth to slow. On Wednesday ECB President Lagarde acknowledged these headwinds during a speech and stated the longer the war persists the higher the economic costs would likely be.

Russia-Ukraine peace talks took place in Turkey this week. Initial hopes of progress led to equity markets rallying, although towards the end of the week there was little sign of any meaningful progress on the ground and equities gave up some of the recent gains. Despite this, global equities have rallied strongly over the last three weeks, recovering a significant portion of year-to-date losses. The US equity market has been a bright spot during March, in part due to its distance from the conflict and limited reliance on Russia for energy needs. Apple, the largest share in the S&P 500 rose on Tuesday for the 11^th consecutive trading day, the share’s longest winning streak since 2003 and took the market capitalisation of the company close to $3 trillion. Tesla announced a stock-split on Monday and on the back of the news the shares rallied around 8%, adding roughly the value of Volkswagen to Tesla’s market cap.

Putin’s demands that payments for Russian gas from ‘unfriendly’ nations be made in Roubles led to significant volatility in European gas prices. On Thursday morning there were reports that Putin would accept Euros, but then later in the day stories broke that Putin once again demanded payments in Roubles. The gas price fluctuated by a massive 18% at times during Thursday.

It felt like déjà vu in the UK, with a Canadian company approaching a UK business for the second week in a row. After Brookfield’s rumoured pursuit of Homeserve, the market was made aware of Royal Bank of Canada’s £1.6 billion offer for Brewin Dolphin. The news propelled Brewin Dolphin’s share price over 60% on Thursday morning and once again highlights the value foreign entities are seeing in UK listed businesses. Staying with the UK, housing data continued to be very strong, with house prices rising on average by 14.3% year-on-year, the fastest rate in 17 years.

As is customary for the first Friday of the month, US Non-Farm Payroll data is released. The figure showed 431,000 jobs had been added to the economy, highlighting the continued strength in the labour market. Unemployment fell to 3.6%, while average hourly earnings came in ahead of consensus at 5.6%. The underlying strength of the US jobs market is likely to encourage the US Fed to continue on their tightening path.

The first quarter of 2022 has been a challenging one for investors with a wide range of asset classes falling over the period, driven by big shifts in interest rate rise expectations and latterly the Russian invasion of Ukraine. Despite these headwinds, it’s been pleasing to see portfolios rebounding from the lows in early March. We continue to believe that diversification in asset class and style will be important when trying to navigate more volatile conditions. Some of the best performing holdings in portfolios this quarter have been gold and infrastructure, two asset classes that wouldn’t typically be found in a traditional bond/equity multi-asset portfolio. We will continue to do the hard work and consider a wide range of asset classes to dampen portfolio volatility and capture investment opportunities, that going forward, could look a little different to the past.

Andy Triggs | Head of Investments, Raymond James, Barbican

Risk warning: With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 19th March – 25th March

March 25, 2022March 25, 2022

It has been a while since we covered the UK in detail in a weekly note, but with inflation data, the Spring Statement and retail sales data all being delivered this week, the UK deserves some bandwidth.

The Spring Statement took centre stage on Wednesday, and the pressure on Rishi Sunak increased with the release of inflation data on Wednesday morning, which came in at 6.2%, the highest level in 30 years and ahead of expectations of 5.9%. The Spring Statement, in truth, did not provide too many surprises and the immediate effect on UK markets was muted. At an economic level, growth was downgraded from 6% for 2022 to 3.8%. While this growth level is still above trend, the impacts of inflation and Russia-Ukraine are expected to negatively impact growth. Data on Friday highlighted that the UK consumer may already be feeling the effect of higher prices, with retail sales falling 0.3% month-on-month and consumer confidence falling to the lowest levels since November 2020. We’ve frequently highlighted that UK equities have traded on a discount to their developed peers since 2016 (Brexit) and one likely outcome of this would be increased M&A activity. After lots of corporate activity last year, we saw Brookfield, a Canadian asset manager emerge as a potential bidder for Homeserve this week. Homeserve shares rose around 15% on the speculation.

European Composite Purchasing Managers’ Index (PMI), which is seen as a useful measurement of economic health, slipped slightly from the previous month, however, was still above expectations and showed the area was still in expansion territory. Digging a little deeper into the data, it appeared that supply issues continued to deteriorate, which could impact future European growth.

The US economy delivered mixed messages this week. Services and Manufacturing PMIs rebounded from last month and came in well ahead of expectations, however this was offset by declining durable goods orders and US business investment falling for the first time in a year. The data potentially highlights that the US economy may be slowing, which could lead investors to question whether the US Fed can be as aggressive in their planned interest rate hikes.

Unfortunately, there appeared little advance in any peace talks between Russia and Ukraine this week with the conflict continuing, deepening the humanitarian crisis. US President Biden was in Europe this week for talks with allies, and said that Nato would respond if Russia escalated to using chemical weapons in Ukraine. The West also promised more aid for Ukraine and increased sanctions on Russia once again, but stopped short of sanctioning Russian gas supplies into Europe. Many European nations rely heavily on Russian gas and the Belgian Prime Minister this week summed up the difficulties they are facing by saying “We are not at war with ourselves. Sanctions must always have a much bigger impact on the Russian side than on ours”.

Equity markets have in general continued to advance this week, despite what feels like an uneasy economic backdrop. At a stock level Apple recorded its eighth consecutive day of rising on Thursday as the tech heavy Nasdaq index rose nearly 2%. The S&P 500 has advanced in six of the last eight trading days as investors have begun to buy the dip following the sharp declines in markets earlier in the year. The recent success in equities has not spilt over into bond markets however, with developed government bond yields continuing to push higher this week. Continued hawkish language from the US Fed has led the market to now price in an additional 7 rate hikes (of 0.25%) for 2022.

Despite the sell-off in government bond yields, we continue to see merits in maintaining small allocations in portfolios for diversification benefits. Our view is that if we are to enter choppy waters ahead, these assets have the potential to perform well, and would likely offset some of the volatility we would see in equity markets. At some point we may even consider adding to these positions if prices continue to fall, as we are in effect buying portfolio insurance at a cheaper price, with a higher potential future payoff.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets – 12th March – 18th March

March 18, 2022March 18, 2022

There are times when content for the weekly note can be hard to find. There are other times when the challenge seems to be finding a way to squeeze in all the key points into just a few short paragraphs that can be easily digested on a Friday afternoon. This is definitely one of those busy weeks with subjects such as Russia’s invasion of Ukraine, US and UK interest rate rises and China’s market intervention all needing to be discussed.

While the Russian invasion of Ukraine has continued, with strikes seemingly intensifying, there have been reports of a softening stance towards negotiations and the hope is that some sort of agreement can be reached in the near-term. These rumours of a potential agreement supported European equities, with the Euro Stoxx index up nearly 5% over the course of the week. UK markets were also once again strong this week, with the more domestically focused FTSE 250 index rising around 3.5% since Monday. The oil price has remained volatile throughout the week, at one point falling below $100 a barrel, but rising again on Thursday and Friday.

The US Fed raised interest rates for the first time since 2018, nudging base rates up by 0.25% to 0.5%. Given the recent strength of the US economy, coupled with inflation running at 7.9% currently, it’s staggering to believe policy has been so accommodative. The market, and indeed US Fed, believe they will need to continue to raise rates throughout the year in an effort to combat inflation and excess growth. However, economists have this week downgraded US growth expectations for 2022 and there is a risk of policy error here; that the US Fed raise interest rates too quickly into what is a slowing economy. On the back of the rate hike and hawkish language from Fed chair Powell US government bond yields rose, with the 10-year treasury hitting 2.2%, a post-COVID high. The Bank of England (BoE) followed suit on Thursday, increasing UK interest rates from 0.5% to 0.75%. The BoE struck a much more dovish tone, acknowledging that inflation is likely to be higher in the short-term due to the invasion of Ukraine, but that higher energy prices would be a drag on growth to net energy importing countries, such as the UK. The expectation now is the BoE may be slightly more cautious in raising rates going forward.

Chinese equities came under intense selling pressure early in the week as investors questioned whether China’s links to Russia could lead to Chinese sanctions. This was on top of concerns around regulation and the Chinese property market and was enough to trigger Beijing to intervene. The state council vowed to keep capital markets stable, support overseas stock listings, handle risks for property developers and said regulation for the technology sector would soon end. The news sent Chinese stocks higher, with the Hang Seng Tech Index up an incredible 14% on Wednesday. China and US tensions continue to be a little strained, so all eyes will be on the call between US President Biden and Chinese President Xi Jingping later this afternoon, the first time the two will have spoken since Russia’s invasion.

What appears like a challenging week has actually been positive for global equities, with most major indices advancing throughout the week, and this has fed through to our portfolios. Bond markets have remained challenged with inflationary pressures negatively impacting prices.

Next week’s note is likely to be a busy one once again; Rishi Sunak is due to deliver the Spring Statement on Wednesday, with energy prices and the National Insurance increase in focus. At a portfolio level we will try to assess the longer-term implications of any announcements, instead of trying to make short-term bets, which are often driven by luck as opposed to skill and notoriously hard to get right consistently.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets – 5 March – 11 March

March 11, 2022March 11, 2022

The last seven days have felt like a rollercoaster in markets with big daily moves in asset prices and volatility remaining high throughout the week. The constant newsflow and short-term noise can prove slightly overwhelming at times like this and frankly it can be unconstructive to making sound long-term investment decisions. We have focused our efforts in recent days and weeks on meeting with or speaking to the underlying fund managers in the portfolios, as opposed to simply relying on BBC news, to get a better understanding of how the current global backdrop is impacting holdings.

At a market level we witnessed big moves in oil markets with the US banning Russian oil imports and the UK stating that they would phase out of Russian oil by year end. At one point on Tuesday, we saw Brent Crude momentarily touch $139 a barrel before falling heavily on Wednesday and is now currently at around $112 a barrel. Prices at the petrol pumps hit all-time highs this week and this will act as a pinch to the consumer. The higher prices are in effect a windfall for the UK government given the level of fuel duties. It will be interesting to see if there are any reductions to these duties to support consumers.

Gold was once again an asset in demand this week as prices rose through $2,000 an ounce on geopolitical and inflationary fears. At times it can be a frustrating asset to hold, but we continue to see the merits in holding this real asset that offers good portfolio diversification and has returned circa 10% this calendar year.

It was not all doom and gloom in equity markets this week. On Wednesday European equities were in favour with the German equity index rising a staggering 7.9% in a day. The UK and wider global equities all participated in this relief rally too, which appeared to be driven in part by the rumours that Zelensky may be willing to agree to certain Russian demands. It’s a reminder of how quickly things can change and highlights the risk of being out of markets. Positive UK data, which showed the economy emerged strongly from the Omicron variant in January, boosted UK equities on Friday; the FTSE 250 index is now on course for its best week in a year, albeit after falling heavily last week. The strong data may encourage the Bank of England to once again raise interest rates when they meet next week.

US inflation came in at a new 40 year high of 7.9% on Thursday, which was in line with consensus. The expectation is that inflation will continue to rise in the coming months as rising oil and commodity prices feed into the data. With the US Fed also meeting next week, many are expecting to see their first interest rate rise of this current cycle.

As mentioned in the first paragraph we have been meeting with a lot of fund managers recently and will continue to over the coming weeks. There were some interesting takeaways; a global equity manager said that their portfolio was flagging the highest upside to fair-value since August 2020. A UK equity fund manager said that they had personally invested in their own fund this week, acknowledging that they didn’t know if this was the bottom, but it provided a good entry point on a medium-term time horizon. We were also reminded of the embedded inflation protection built into some of our infrastructure and real asset holdings. We will continue to carry out this exercise and focus on making sure we are partnered with talented fund managers and diversify across asset class, investment style and geography.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets – 26 February – 4 March

March 4, 2022March 4, 2022

This has been another tough week on a humanitarian front, and we want to continue to extend our thoughts and best wishes to everyone impacted by the Ukraine crisis. The purpose of the weekly note, as always, is to report on financial markets, which too have endured a difficult end to the week.

This week has seen heightened volatility across most asset classes as markets attempt to price in a prolonged Russian invasion and the associated risks this would create. As Simon Evan-Cook alluded to in yesterday’s monthly note, uncertainty is something that markets dislike, and uncertainty has increased over the last few trading days.

Safe-haven assets have generally rallied this week, albeit, with bumps along the way. At the start of the week, we witnessed significant falls in developed government bond yields (prices rise). The likely driver of this is the expectation of slower economic growth, which could deter central banks’ from raising interest rates at an aggressive pace. However, it is still likely that the US Fed will raise interest rates by 0.25% this month. Fed chair, Jay Powell, spoke to the House of Financial Services Committee and clearly showed his support for a modest interest rate rise in March to help curb inflation, while acknowledging it was too early to determine the economic impact of Russia’s invasion of Ukraine.

While government bonds and gold responded to the escalating conflict by rallying, equity markets hit more turbulent times, with big falls on Thursday and Friday (at the time of writing). French president, Macron, spoke with Putin for 90 minutes, with little success and it became clear a resolution was not close and there could be worse to come. While the sell-off has been broad-based, European equities have generally fared worse than US equities, which is a clear reversal from the trend in January and February this year.

The commodities sector looks poised to finish the week with its biggest weekly gain since the 1960’s. Brent crude oil briefly touched $119 a barrel this week, the highest level since May 2012. European and British gas prices pushed higher with the benchmark Dutch gas price hitting new all-time highs. Rising oil and gas prices will hit the consumer hard which will be a drag on economic growth and is something we need to pay attention to. Consumer balance sheets are generally robust given the ability of many to deleverage and save during COVID-induced lockdowns, however, higher energy prices could see this trend reverse. It wasn’t just oil and gas rising this week, copper hit a new all-time high while wheat prices have risen nearly 75% in 2022. Ukraine and Russia are two of the major exporters of wheat globally and their supply is likely to fall significantly.

As is customary for the first Friday of the month, US Non-Farm Payroll data was released. This is normally a key focus of the market; however, it has been left in the shadows by the geopolitical concerns. The data was very strong, showing 678,000 jobs had been added to the economy against the consensus of 400,000 and the unemployment rate fell to 3.8%. These numbers highlight the underlying strength of the US economy at present and will likely encourage the US Fed to raise rates later in March.

The backdrop of a Russia war makes it uncomfortable to be invested currently and will stir up a range of emotions for investors. While the cause of the concern is different this time, many of the emotions people are feeling will be similar to the initial COVID-19 crisis in March 2020, a period where uncertainty engulfed markets and assets sold off indiscriminately. With hindsight this was the opportune moment to actually be increasing risk. While we don’t want to take undue risks in portfolios, it can be helpful to look back to other crisis moments in history.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets – 19 February – 25 February

February 25, 2022February 25, 2022

Many of our readers will no doubt be aware that this week has been historic for all the wrong reasons, with Russia invading Ukraine. We know it is a difficult time and our thoughts are with those people affected by these events.

Focusing on the impact on markets, we have seen big swings in global equities this week. It’s worth remembering that equity markets are typically forward-looking, and the potential geopolitical risks were in part already discounted into prices. However, it appears that the full invasion witnessed towards the end of the week was not ‘in the price’ and we saw European and Asian markets fall heavily on Thursday. The US equity market, after opening in the red, staged a remarkable comeback and actually ended the day up, with the S&P 500 closing 1.5% higher. Japanese equities rose by a similar amount overnight and UK and European equities are in positive territory today at the time of writing. At this stage, it’s not 100% clear what the endgame will be, and with that uncertainty still lingering, there is potential for asset prices to remain volatile in the short term.

Safe-haven assets have responded to the turmoil, with prices generally rising this week. Within bond markets, investors are beginning to question whether central banks will be able to raise interest rates as aggressively as expected, into what could be a slowing global economy. Other safe-havens such as gold and the US dollar also performed well. It’s a timely reminder of their insurance like characteristics and it is why they are held in our clients’ portfolios.

The oil price broke through $100 a barrel, climbing to eight-year highs on concerns around global supply. Russia produces around 11 million barrels of oil a day, much of which is exported, and this supply could be impacted if Western sanctions escalate. European natural gas prices also spiked; Russia currently supplies around 35% of Europe’s natural gas and again this supply could become strained. Rising commodity prices will do little to soothe concerns about inflation, although it should be remembered that higher energy prices act as a quasi-tax on the consumer and could have the effect of dampening demand for goods and services and this is deflationary.

There was some positive economic data released this week, although clearly this has been overshadowed by Russia’s invasion of Ukraine. Services and manufacturing PMI data for the UK came in ahead of consensus and US GDP for Q4 2021 was revised higher to 7%.

Periods, like we are going through now, are highly emotive and it can feel very difficult to be invested in asset markets. History has repeatedly shown us that these uncomfortable moments are often also opportunities, especially for investors with a long-term time horizon, who can look through the short-term headwinds. At an investment committee level, we try to do this in an objective, structured way to ensure we are making appropriate long-term decisions for the portfolios.

Andy Triggs | Head of Investments, Raymond James, Barbican

With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 12 February – 18 February

February 18, 2022February 18, 2022

With Storm Eunice arriving today, preventative measures have been taken to minimise damage, with schools shutting, transport networks closing, and people being advised to stay indoors. The word “storm” is used frequently when describing the weather, but the classification of a storm is when the wind is measuring 10 or above on the Beaufort Scale (55mph or higher).

This week’s weather system seems to have reflected the current mood in markets. It’s been unpredictable and varied, with moments of sunshine, but as we head towards the end of the week there is potentially worse to come.

Geopolitical tensions have continued to dominate newsflow this week. On Tuesday there were reports of troop withdrawals from Russia, however, these claims were denied by NATO who stated this was not being witnessed on the ground. Risk assets (equities) advanced on hopes of a diplomatic solution to the crisis, and then fell away again as tensions seemed to escalate. Throughout the week both the US and UK have held regular briefings and shared a lot of intelligence with the media and public. It is seen as a clear strategy to try and remove the element of surprise from Putin and helps them control the informational war. While equities have been choppy, safe-haven assets such as gold have performed strongly. The precious metal price topped $1,900 per ounce on Thursday, which was an eight-month high. Government bond yields have fallen from recent highs in another indication that safe-haven assets are in favour this week.

Defensive positioning was reflected in this month’s Bank of America investor survey, which showed cash allocations at the highest level since May 2020. Interestingly, this is used by some as a contrarian indicator, and they will see high cash allocations as a clear buy signal.

Inflation concerns continued to rumble away with the latest UK CPI number coming in at 5.5%, a 30-year high, with items such as clothing and footwear seeing big jumps in prices. Over in the US, the Fed’s meeting minutes were published and the language was less hawkish than feared. The US consumer, despite seeing their cost of living being squeezed, provided some positive news this week with US retail sales coming in at 3.8% (month-on-month), considerably ahead of expectations.

The Office for National Statistics (ONS) UK House Price Index showed price increases of 10.8% for 2021, putting the average price of a UK home at £275,000. London has been a laggard compared to other UK regions, as people left the city and opted for more space as work from home policies were put in place. However, there are reports of a ‘boomerang effect’ occurring with young workers flooding back to London given offices are re-opening and COVID measures are being removed.

Markets, in general, have been stormy in 2022, facing wind and rain in the form of inflation and geopolitical risks. The key questions remain about how long these forces will persist, and what impact they will cause should they strike. Forecasting is a notoriously tough thing to do accurately and as such our focus remains on diversification in portfolios to avoid some of the worst weather conditions, while also being able to make hay when the sun shines again.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets – 5 February – 11 February

February 11, 2022February 11, 2022

If one was to google the year 1982 a few things would likely appear; the birth of Prince William, the Falklands War or Liverpool winning the league. What most won’t know about 1982 is that US inflation was 7.5% that year and, until this week, had never been reached again.

The headlines on Thursday were dominated by US inflation, which came in ahead of expectations, at 7.5%, a 40-year high. Shelter, energy costs and used cars were some of the key drivers of inflation – used car prices are now a staggering 40% higher than they were 12 months ago. The data added to the expectation of US interest rate rises, which was further fuelled by comments from St. Louis Federal Reserve President James Bullard who called for a 1% hike in rates by July. The market reacted immediately yesterday, with US equities snapping a strong two-day winning streak to end down on the day, led by the more growth-orientated equities. The trend of rising bond yields (and therefore falling prices) accelerated, with the US 10-year Treasury bond rising through 2% for the first time since 2019.

Staying with the 7.5% figure, the UK economy grew at 7.5% in 2021, the fastest pace since World War II. It’s worth remembering that 2020 was a year where the economy collapsed by nearly 10%, and so a strong rebound was expected. A UK survey showed that starting salaries rose in January by their third-highest rate on record, as workers are demanding higher wages to compensate for the increased cost of living. The Bank of England Governor, Andrew Bailey, made himself unpopular with comments suggesting workers should be restrained in pay expectations in an effort to stop wage inflation spiralling out of control.

We haven’t written about COVID-19 for a while, and this week Boris Johnson suggested that all COVID measures could be scrapped at the end of the month, nearly two years after the initial lockdown in March 2020. Some suggested this was an attempt to deflect away from “partygate” and indeed there were rumours that the top UK scientists had felt blindsided by the news.

Russia-Ukraine tensions appear to have moved up another notch this week, with Russia carrying out military drills with Belarus. Boris Johnson also commented that the crisis has now entered its “most dangerous moment”. Oil prices have remained high on the fears of future supply issues.

At an asset market level, many of the equity indices have partially recovered from recent lows around 24 January. However, the bond markets have continued to drift lower on the back of expectations of robust global growth and higher inflation in the year ahead. At the moment the market narrative is completely focused on inflation, and I’m sure it was similar in 1982. Who would have thought the next 40 years would see negative interest rates, deflationary pressures and falling bond yields.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets 29 January – 4 February

February 4, 2022February 4, 2022

There are some weeks when writing the weekly round-up is quite challenging; newsflow may have been slow, markets benign and frankly nothing too interesting to report on. Then there are weeks like this one, where there are a multitude of topics to discuss, covering a wide range of subject matter.

We will start on domestic shores, with the Bank of England’s (BoE) decision on Thursday to raise interest rates by 0.25%, up to 0.5%. Interestingly the vote was 5-4, with four members voting for an immediate 0.5% hike in rates. This hawkish sign of intent from the BoE led to a sharp rise in sterling and a sell-off in government bonds, with yields rising (therefore prices falling). While rising interest rates can feel painful and create market volatility it’s worth remembering that at the start of 2020 (pre-COVID-19), UK interest rates were 0.75% and therefore we are so far witnessing a reversal in some of the extraordinary measures put in place during the pandemic. The million-dollar question is how high the BoE (and other central banks) will take interest rates.

It wasn’t just UK bonds that suffered on Thursday, it was an ugly day across the board with rising government bond yields a clear theme. In Europe we saw inflation once again surprising to the upside, coming in at 5.1%. The European Central Bank has been very dovish in their approach and has suggested that they will hold off raising interest rates in 2022, however, this high inflation print has piled pressure on them to act, and the movements in Eurozone bonds suggests the market is pricing in higher interest rates sooner rather than later.

Oil prices continued to push higher this week, with the US Crude benchmark breaking through $90 a barrel, the first time this price has been reached since 2014. A combination of supply issues and fears, coupled with cold weather in the US pushed the price of black gold up. With multi-year high prices, it’s no surprise that the stand-out sector in markets this year has been energy.

With elevated stock prices, particularly in the US, earnings season felt like a big event, and results would need to justify some of the valuations assigned to companies. After stellar results from Microsoft and Apple this week, all eyes were on Meta (previously Facebook) and Amazon. Meta’s disappointing results led to a fall of over 20% in its share price on Thursday, which was around £200bn in market value, and equated to a $29bn loss for Mark Zuckerberg. One of the standout figures from their results was that ‘Daily Active Users’ were down in Q4 2021, which was the first quarterly decline in the history of Facebook. The fall in Meta’s share price impacted the US market, which fell on Thursday, after rising for four consecutive sessions previously. Amazon’s share price declined heavily on the expectation of weak data, however, following strong results last night, the share price is up over 10% on Friday’s US market open.

As is customary the first Friday of the month sees the release of US Non-Farm Payrolls data. While the last couple of jobs reports have been underwhelming, January’s figure showed 467,000 jobs added to the economy against a consensus view of 150,000. Average hourly earnings also beat consensus, which is likely to do nothing to dampen expectations of US rate rises to help curb inflation.

Another volatile week in markets, and while it may not have felt that comfortable, global equities have actually ended the week higher than they started. This is often the case with investing, some of the most uncomfortable times are when the best returns can be made. To achieve this, we believe a robust process is required, one that helps strip out the emotion from investing. Our efforts to deliver this at Raymond James, Barbican will stand our clients in good stead through the years ahead.

Andy Triggs | Head of Investments, Raymond James, Barbican

The Week In Markets – 22 – 28 January

January 28, 2022January 28, 2022

For the final weekly round-up of January, I could have very easily copied and pasted the first round-up of the month. The themes of a pickup in market volatility, concerns around inflation and the increased expectation of rising interest rates have plagued asset markets all month, and this week was no different.

The volatility in equity markets was apparent on Monday with UK and European indices ending the day sharply lower. The US market initially fell by around 4% on Monday morning but staged a remarkable recovery to actually end the day in positive territory and reverse severe losses. Despite this bounce back, US bourses have generally drifted lower throughout the week. By Tuesday, January had officially become the worst January on record for the US S&P 500, outpacing the falls we saw in January 2009.

Staying with the US, the Federal Reserve met on Wednesday and although they didn’t raise interest rates, they have signposted a likely first rate hike in March, while also referencing “historically tight labour markets”. We had positive GDP data for the US, showing the economy grew by 5.7% in 2021 – the fastest growth since 1984. Strong GDP growth for 2021 was a theme this week, with French GDP reported at 7%, the highest since 1969. Against a backdrop of strong global growth and rising inflation, it’s no wonder that central banks globally are in the process of raising rates from record lows.

Fears of a Russian invasion into Ukraine have increased this week as Russian demands to bar Ukraine from Nato were rejected. Any invasion is likely to be met with economic sanctions and could have big implications for energy markets. Russia produces over 10 million barrels of oil a day and sanctions could see global supplies fall. It’s no surprise that oil prices rose throughout the week, at one point reaching $90 a barrel for Brent Crude oil.

PMI data for UK and Europe this week was a mixed bag; UK services and manufacturing reports highlighted expansion, but was slightly below consensus, while the equivalent German data came in ahead of consensus.

Against a backdrop of volatile equity markets, it was pleasing to see Apple and Microsoft (the two largest companies in the US) both release strong Q4 earnings reports. Apple reported its highest-ever quarterly revenue, beating estimates, while CEO Tim Cook commented that the supply chain issues were improving. Microsoft also released stronger than expected earnings growth. These stellar results should help calm markets and help justify the lofty valuations assigned to some of these high-quality technology companies.

The final paragraph could also have been copied and pasted from previous weekly round-ups, with a reminder that we continue to focus on being long-term investors and aiming to seek balance and diversification within portfolios. It’s fair to say that pretty much anything can happen in markets over one month, but over five, ten or even twenty years we expect fundamentals to be the main driver of markets, and by focusing on this we can take advantage of moments when prices disconnect from fundamentals.

Andy Triggs | Head of Investments, Raymond James, Barbican