News & Updates

The Month In Markets – February 2023

The strong start to the year failed to gain traction in February with most asset classes suffering declines. Strong economic data and surprising inflation led investors to question the latest narrative of a “Goldilocks” investment environment and start to consider a “higher for longer” interest rate environment.

Before we discuss the likely reasons for the market movements in February, it is worth considering investment timeframes, and the perils of being too short term. Writing these monthly pieces is a reminder to me about the difficulties with investing and why it is important to take a long-term perspective. It feels like each month there is a new story for investors to focus on and a change in market direction and leadership. If we were to follow the short-term noise we would continually be buying at recent highs and selling at recent lows. The two very different market conditions in January and February this year are evidence of this in action. Often the world is not as bad, or indeed not as good as the short-term noise suggests, and for those long-term investors, willing to look through the noise, there can be significant long-term rewards. It is always worth remembering the quote from Warren Buffett – “The stock market is a device for transferring money from the impatient to the patient”.

And so, to February. The optimism of January, driven by expectations of falling inflation and a stronger-than-expected economy, made way to a view of inflation re-accelerating and central banks being forced to take interest rates higher, and keep them there for longer. The “Goldilocks” narrative of January was soon replaced with the “higher for longer” narrative for February.

US Inflation data came in at 6.4% (year-on-year). This was ahead of expectations (which were 6.2%) and only slightly lower than the previous month’s 6.5%, indicating the pace of change was slowing. This data challenged the view that inflation was on a clear path lower and called into question whether the US Fed could ease up on their fight against inflation. We witnessed a rise in bond yields (fall in price) as investors priced in higher US interest rates later this year. As was the case last year, higher expected interest rates negatively impacted equities, with some of the bond proxy stocks being hit hardest.

European inflation data, released at the end of the month, confirmed that the battle against inflation may not yet be over. Surprising jumps in both French and Spanish inflation data led investors to price in a higher terminal rate for European interest rates (moving from 3.5% to 4%). Higher interest rates, kryptonite for bonds, led to rising government bond yields (falling prices). The yield on the 10-year German bund hit 2.70%, the highest since 2011. Less than a year ago the same 10-year bund had a negative yield!

During the month of February economic data releases broadly came in ahead of expectations, indicating that the US and global economies were more resilient than expected. Again, this helped to feed the new narrative that the work of central banks may not yet be over, and a period of higher rates for longer may now be upon us. US Non-Farm Payrolls data, one of the most watched data releases, highlighted extreme strength in the labour market. The previous six months had seen a slowing pace in job hiring in the US and this was expected to continue into January. The consensus view was for around 185,000 jobs to be added to the economy. The official number was above 500,000! This strong hiring in January points towards tightness in the labour market, which is likely to continue to put upward pressure on wage inflation.  Here in the UK the labour market also remains tight, while wage inflation has recently been exceeding expectations. After the Bank of England raised interest rates by 0.5% at their previous meeting, they are now expected to carry on further and increase rates by an additional 0.25% at their next meeting (taking rates to 4.25%).

In the previous monthly piece, we commented on some of the drivers of the stronger-than-expected economy and these factors are likely to have continued to support the economy in February. As a reminder, these were plummeting gas prices in Europe and more generally cheaper energy prices globally, and the re-opening of China and rebound in economic activity currently underway in the world’s second largest economy.

The swing in sentiment in February generally led most asset classes lower, in complete contrast to January when almost all assets rose in value. As has been highlighted already the oscillating nature of markets in the short-term can lead one to overtrade and continually chase their tail in search of returns. We think the probability of success, or at least repeated success, is extremely low from taking such short-term views.

We are taking note of the recent data, but as the saying goes, one swallow does not make a summer. Our bigger-picture thinking still leads us to be cautious about the global economic outlook. We are mindful that it will take time for the impact of higher interest rates to feed through to the economy. Remember 12 months ago the US Fed hadn’t even begun to raise interest rates!

With higher expected returns on defensive assets, such as cash and short-dated government bonds, we believe we are being paid to be patient, a scenario we have not really experienced over the previous decade.

Appendix

5-year performance chart

Risk warning: With investing, your capital is at risk. Opinions constitute our judgement as of this date and are subject to change without warning. Past performance is not a reliable indicator of future results. This article is intended for informational purposes only and no action should be taken or refrained from being taken as a consequence without consulting a suitably qualified and regulated person.

Andy Triggs

Head of Investments, Raymond James, Barbican

This week we entered the month of March, named after the God of war, Mars. March was the time of year when soldiers recommenced any war that was interrupted by the winter. March also is the month of a few significant events, St Patricks Day, Ramadan and the change in Daylight saving time.

Continuing with our weekly review rather than a history lesson, UK home owners have had their own battles with house prices. It is important to remember that house prices soared during the pandemic, boosted by ultra-low interest rates, stamp duty tax incentives and greater demand for living space, but we are now seeing a reverse. Average house price growth turned negative over the month of February, with the 1.1% (year-on-year) drop being the first annual decline since the pandemic. In the current climate of high inflation and rising interest rates, home owners that have attempted to sell their property have on average had to shave approximately £14,000 off their asking price. The “cooling” effect on the housing market is likely to continue as potential home buyers will be facing higher mortgage rates as the Bank of England (BoE) are predicted to further raise the base rate by 25bps at the next meeting.

The housing market in the US has been estimated to fall by 4.5% over 2023, this is modestly lower than previously expected despite the prediction that interest rates will continue to rise. The fall is only marginal in comparison to the gains since 2020 – with house prices up a staggering 45%.

Tesla is seemingly in a world of trouble again after their strong start to the year. The share price took a plunge in 2022 due to a plethora of concerns: Mr Musk’s Twitter takeover, halts on production at China factories, and fears on the demand for electric vehicles (EV’s).  However, after a tough 2022, performance has since soared as Tesla has delivered 75% year to date. Their highly anticipated investor day was on Wednesday as Mr Musk and other executives detailed plans to cut manufacturing costs and invest in a new plant in Mexico. The 7% fall in share price on Thursday was triggered by the lack of detail when the top executives were pushed on a timeline for on a new model, expected to be affordable and accessible for households.

European Central Bank (ECB) Chief Economist Phil Lane made major comments this week as he gave some insight into the thoughts of the key policymakers. He maintained that the ECB would not end rate hikes until they were confident inflation was heading towards the 2% target with rates raising by 300bps since July 2022. However, he believes that monetary policy is filtering its way through the economy, with lower oil and gas prices, the easing of bottlenecks and China’s reopening as factors that will help lower inflation. Markets are now expecting rates to continue to increase to 4% by the end of the year.

China’s reopening from their strict zero-Covid policy continues to be positive as manufacturing activity expanded on Wednesday at its fastest pace in over a decade. PMI (purchasing managers index), which is an index of the direction of economic growth in the manufacturing sector, shot up to 52.6 from 50.1 in January. The PMI impressively beat the forecast of 50.5 and is the greatest expansion since April 2012. The news positively impacted Asian equities, feeding into markets as the Nikkei 225 closed 1.56% up on the week and the Hang Sang closed up 0.68%.

The roundup of the weekly is always consistent even if this isn’t always the case with markets. We continue to blend asset classes in portfolios to diversify risk(s) and smooth the overall return profile.

Nathan Amaning, Investment Analyst

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.

In this month’s Market Commentary, Raymond James UK European Strategist, Jeremy Batstone-Carr, discusses a new term in the financial lexicon, a change in the market’s tone and why, despite the challenges ahead, there is cause for optimism in the long run.

Today marks a year since Russia invaded Ukraine. From a financial market standpoint, it has been a difficult twelve months with equities and bonds impacted.   Putin seems determined to continue his invasion and even had the US holding their breath this week as he announced Russia would be halting their participation in “New Start”, a nuclear arms treaty. During a state address, Putin looked to support the Russian economy, promising tax breaks for businesses and government support for fighters returning from the war in Ukraine, a further prop-up for the economy that held up considerably well last year, despite the numerous western sanctions.

This week the Chancellor of the Exchequer was handed a timely boost with the UK running an unexpected budget surplus in January. With the budget set to be delivered on the 14th of March, the surplus of £5.42bn ideally gives Mr Hunt some wiggle room to potentially fund short term tax cuts or raise spending. However, he has set a stern tone this week stating that there is no possibility of greater pay for nurses and public sector workers despite the ongoing strikes.

New Rolls Royce CEO, Mr Tufan Erginbilgic’s term has got off to a flying start with the company beating profit forecasts. They are hoping for more consistent performance this year as underperformance in previous years was heavily influenced by the pandemic; grounded aircraft led to a significant collapse in revenue. They have estimated that this year they will return to 80% – 90% of pre-pandemic engine demand.

German inflation has shown little signs of easing as high food and energy prices persist. The year-on-year figure for January was 8.7%, coming in higher than December ‘22. Germany have certainly felt the brunt of the Russia/Ukraine war as households saw a 23.1% energy rise on the year despite significant government relief measures. The high inflation in Europe’s largest economy may influence the European Central Bank’s interest rate setting policy.

Strong early US market performance has begun to unwind as investors mull the US Fed’s next move. Bonds and equities have once again been positively correlated in recent weeks, with equities falling as bond yields rise (prices fall). A series of strong economic data readings have led investors to price in higher interest rates and a delay in a potential ‘Fed pivot’. The S&P 500 is down -2.49% on the week with its greatest fall in 2023 coming on Tuesday at -2% but is still 4.13% up year to date.

We have seen another historic data release this week as Japan inflation hit a 41 year high in January, core inflation rising 4.2% year on year.  The Bank of Japan will soon have a new man in the hot seat, Mr Kazuo Ueda, and he faces a decision on whether to abandon the current ultra-low interest rate policy.  He spoke this week stating the recent acceleration in inflation was driven by rising raw import costs rather than strong demand. Japan’s economy narrowly avoided a technical recession in Q4 of last year but certainly rebounded less than expected as business investment slumped.

As ever we will continue to do the hard work and consider a wide range of asset classes to reduce portfolio volatility and capture investment opportunities. Diversification in asset class, style and management is key in order to navigate the markets. By not losing in the short term, you can win in the long run.

Nathan Amaning, Investment Analyst

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.

Early this week many across the world celebrated the day of love, Valentines. Regardless of the current economic environment, the gifts and gestures are still given in abundance, with US consumers spending $26bn on the day alone. That figure is up from $23.9bn last year and marks the second highest year of spending over the last 30 years.

This week has also been jam-packed with data releases. On Wednesday there was a slowdown in UK inflation as annual CPI came in below forecasts at 10.1% and core inflation (excluding food and energy) dropped to 5.8% from the previous 6.3%. The better-than-expected fall in inflation will be a relief to the Bank of England, giving confidence their series of rate hikes are working. The latest release was the second data point proving the peak in inflation may be behind us. As a result, sterling has fallen against the Dollar almost 150 basis points towards the end of the week to $1.19.

The UK market has been on a tear since Q4 ‘22 as the drop in inflation further boosted markets. We’ve seen the FTSE 100 now break 8,000, reaching all-time highs. We’ve previously spoken about record profits from the UK’s large energy firms Shell and BP, and Centrica, the parent company of British Gas, has now also seen sky-high profits of £3.3bn. Campaigners have spoken out on tougher windfall taxes and lower prices on the company as they attempted to install prepayment meters in households.  Last year the CEO of Centrica, Chris O’Shea, waived his £1.1m bonus as he could not accept it “given the hardships faced by our customers”, he has yet to comment if he will do the same this year-round.

Inflation in the US was a similar story as annual inflation rose 6.4%, down only 0.1% from the previous month. Core inflation also dropped 10 basis points to 5.6%, however the move is not as significant as economists predicted. The latest inflation results still have a way to go to reach the US Fed’s target of 2% and investors are almost certain further hikes will take place. The continued strength in the jobs market is another factor the Fed will be monitoring, as wage increases may feed inflationary pressures.

US retail sales have roared back in January, smashing the forecast of 1.8% and delivering 3%. This was the greatest increase in over two years and follows on from two negative months. When analysing the breakdown, motor vehicles purchases led the race at 5.9%. Lower income households are certainly feeling the pinch of elevated interest rates, however banks believe there are still suitable cash buffers and borrowing capacity.

In a never-ending saga, RMT, the union which represent 40,000 workers across 15 train operators has rejected the latest offer from employers. This has again led to more planned strikes over the coming weeks with the next scheduled date in just a month’s time. It is important to state that the union are not only battling for better pay, but greater job security and working conditions.

Every week following data releases, the pendulum swings and investors are left to guess the moves policymakers will make next. We try to stay clear of the short-term noise and ensure that we are not overly exposed to specific outcomes.

Nathan Amaning, Investment Analyst

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 Month In Markets – January 2023

The first month of 2023 has proved to be an extremely good month for equities and bonds across the globe. Many of last year’s laggards led the market higher, with the US tech-heavy NASDAQ index recording its strongest January since 2001.

It appears there were three main catalysts which spurred markets on in January which we will discuss in this note.

The first is China. The world’s second largest economy very recently emerged from strict COVID-19 lockdown measures. Almost overnight the zero COVID-19 approach was abandoned and the economy was reopened. The general consensus was for the lockdowns to persist well into 2023, however, civil uprisings appeared to force Chinese leaders into cancelling their lockdown measures. Having already witnessed developed markets reopen post COVID-19 there was a clear playbook to follow, and the expectation is that Chinese consumption will pick up dramatically which will be good for the Chinese and overall global economy.

The second catalyst is energy. As we headed into the winter months at the end of 2022 there was genuine concern that Europe would run out of gas, and that European and UK consumers were going to be facing months, and potentially years, of sky-high energy bills. As a result, markets were pricing in a very weak consumer and a recession across the UK and Europe. A combination of good fortune, through a mild winter, and good forward planning, through high levels of gas storage, meant the expected energy crisis never fully materialised. As a result, we’ve seen gas prices fall as demand has been lower than expected. It’s clear that the outlook for these economies is still concerning, however, with equities pricing in so much bad news already we saw a strong rebound in these markets.

The third driver of markets has been inflation. In truth, all the points discussed here are intertwined. China reopening is good for supply chains, which should ease some of the inflationary pressures, while lower energy prices will also lead to inflation falling. During January we received validation of this through US inflation coming in at 6.5%, continuing the recent downtrend. After reaching 9.1% in June 2022, inflation data has continued to come in at lower levels, giving investors’ confidence that we have turned a corner. European and UK inflation also appears to have peaked and fell from recent highs in January. If we have finally turned a corner with regards to inflation, then central banks should be able to be more accommodative in their monetary policy. It was no surprise therefore that sectors such as technology, which really struggled in a higher interest rate environment, rallied as markets priced in interest rate cuts for the end of 2023.

The more positive outlook not only boosted equity markets but also helped the higher (credit) risk areas of fixed income, with high yield bonds performing strongly. Falling inflation helped boost government bonds, while gold rebounded as real yields fell.

While energy, inflation, and China re-opening appeared to act as catalysts, it is also important to consider positioning and valuations. Fund manager surveys towards the end of 2022 highlighted very defensive positioning from managers, with high cash weightings and low allocations to risk assets. The more positive news flow therefore has driven significant flows back into equities this year, supporting prices. Valuations for most regions have also been trading below long-term averages. While valuation metrics are a poor predictor of short-term returns, they are a good explanatory variable for long-term returns. As such asset allocators with a genuine long-term view will have likely increased exposure in January.

The $64,000 question is whether this strong rally in asset prices is a classic bear market rally, or something more persistent. The simple answer is that no one knows, and making such bold calls is a dangerous game.

Our approach at this stage is to be very diversified in our positioning, even more so than usual. We are also trying to avoid the behavioural traps that strong market moves (both up and down) can cause. This is easier said than done but falling back on a process and the experience of our team and investment committee really helps. While some of the near-term noise has been very positive of late, there are still leading indicators (such as the yield curve and housing market) that necessitate us to proceed with caution.

Appendix

5-year performance chart

Risk warning: With investing, your capital is at risk. Opinions constitute our judgement as of this date and are subject to change without warning. Past performance is not a reliable indicator of future results. This article is intended for informational purposes only and no action should be taken or refrained from being taken as a consequence without consulting a suitably qualified and regulated person.

Andy Triggs

Head of Investments, Raymond James, Barbican

Fresh news this Friday has seen the release of UK GDP for Q4 2022. The UK economy flatlined for the final three months of 2022; investors and policy makers have taken the positives from this as the UK avoided entering a recession (for now). GDP (Year on Year) for December came in at -0.1%, narrowly beating the forecast of -0.2%, with the main detractor being the widespread strikes in the public sector, rail and postal services.

The Chancellor of the Exchequer, Jeremy Hunt, responded immediately to the data release stating the economy has an “underlying resilience”, however he followed this with a warning that “we are not out of the woods yet”. Inflation is still too high and output in the fourth quarter was still 0.8% below pre-pandemic levels, lagging other countries which are now back above pre-pandemic size. This news will still offer some short-term relief to Mr Hunt and Prime Minister Rishi Sunak as they seek measures to spur a rebound in the upcoming annual budget set to be announced in early March.

Last week we saw energy firm Shell report record profits and this week was BP’s turn to announce their blockbuster profits. $28 Billion was their record profits for 2022 setting a new record from 2008, however they have since come under fire for pushing back on plans to reduce carbon emissions by 2030. The target has been lowered from 35-40% of emissions cut to 20-30% and this is one of the main factors for BP’s valuation lagging competitors such as Shell and Exxon.

In the US, the news of a Chinese spy balloon being shot down almost overshadowed the staggering non-farm payroll data from last Friday afternoon. The 61-metre surveillance balloon which flew over the Atlantic Ocean to the US before being shot down was downplayed by Biden as “not a major breach” but a violation of international law. This hence allowed the US to act accordingly once it crossed into their airspace.

Labour hoarding has been a term used to describe the US non-farm payroll data as a stunning 517,000 jobs were added to the economy in January. This figure smashed the forecast of 188,000 with jobs being created in almost every sector – strongly in services, leisure and hospitality, and education and health. Investors are led to believe that labour hoarding exaggerated the strength of the jobs market and will likely reverse in Q2 of this year if economic growth continues to slow. Hoarding is common for employers that are uncertain about the outlook, leading them to hold onto labour, which has been very difficult and costly to recruit recently.

US Fed Chair Powell spoke at a Q&A session on Tuesday evening. Despite the very strong jobs data Powell did not appear to significantly change his interest rate outlook. This was well received by markets, which advanced on the back of this news.

After a very strong start to the year, equity markets have paused for breath this week. The extremely strong US jobs data, coupled with expectation beating services data has led investors to question whether central banks will be able to ease up on their fight against inflation. It appears we are currently in the strange environment of good news for the economy being bad news for stock markets!

We are sad to hear the news of Monday’s earthquake in Turkey and Syria which has led to over 20,000 deaths. Hundreds of thousands of households have been left homeless this winter. President Tayyip Erdogan of Turkey is expected to face his toughest challenge yet as there has been anger over the delays on deliveries and rescue efforts. In Syria, relief efforts have been hindered by conflicts in rebel held districts. Our thoughts go out to all affected.

In these uncertain times we as always maintain our message on diversification and ensuring portfolios are not overly exposed to particular risks. It is important to focus on the long-term opportunities that are created in markets, with the saying “slow and steady wins the race” underlining this.

Nathan Amaning, Investment Analyst

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.

This week saw the transition from January to February, the shortest month of the year. The month derives its name from the Latin word februa, which means “to cleanse”. Central bankers from the US, UK and Europe all met this week and their dovish messaging has certainly helped cleanse markets this week.

The US Fed met on Wednesday and as anticipated raised interest rates by 0.25%, as they continue to slow the pace of their rate hikes. While Fed Chair Powell attempted to convince markets of their commitment to take interest rates higher, markets dismissed this and have begun to price in an environment where central banks will be easing policy by year end and inflation will quickly fall back to target. This view was enough to send equities significantly higher, led by last year’s laggards. In some ways this is intuitive; the stocks most negatively impacted by higher inflation and higher interest rates, should therefore benefit the most if and when these trends reverse. The tech-heavy NASDAQ index registered its best January since 2001 and has also seen strong rises on Wednesday and Thursday. At a stock level Meta (facebook) has been a stand-out, with its shares rising 23% on Thursday on the back of positive results. It was not all positive for the US mega cap names however, as weak results from Apple and Alphabet (google) on Thursday evening will likely lead to declines when the US market opens today. Apple registered a 5% drop in sales for Q4 2022 compared to Q4 2021, its biggest decline since 2019.

The Bank of England (BoE) and European Central Bank went one better than their US counterpart on Thursday, raising interest rates by 0.5%. UK base rates are now at 4%, while European rates are at 3%. For the UK this was the tenth consecutive time interest rates have been increased, now reaching 14-year highs. The 0.5% rise was driven by concern over private sector wages rising too fast and leading to embedded inflation. There were some positives from the meeting, with the BoE stating that inflation “is likely to have peaked” and a recession would be less severe than previously predicted. The news of a shallower recession was well received, with the UK mid cap index rallying over 3% and significantly outperforming the UK large cap index, which is typically more internationally exposed. UK government bond yields fell significantly, driven by the expectation of inflation falling quickly. The UK 10-year gilt yield fell to 3% on Thursday.

While the technology focused companies posted disappointing Q4 earnings, the energy sector has posted stellar gains, benefitting from the rise in oil and gas prices following Russia’s invasion of Ukraine. Shell posted its highest ever annual profit of $40 billion for 2022. The US energy company Exxon mirrored Shell’s success, with full year profit of $56 billion. These energy companies could face a level of backlash as they appear to have significantly profited from the energy crisis.

As is customary for the first Friday of the month, US Non-Farm Payrolls jobs data was released. The data smashed expectations and showed a staggering 517,000 jobs were added in January, beating expectations of 185,000. The pace of hiring had slowed in each of the past six months, and this was expected to continue in January. This much stronger than expected data is likely to impact the US Fed’s thinking and could mean rates now need to stay higher for longer in order to cool the economy. Following over half a million jobs being added to the economy, we witnessed unemployment fall to a 53 year low of 3.4%. Although the US equity market has yet to open, the futures market indicates much of Thursday’s gain will be given up today. Good news, it appears, is bad news for markets at the moment!

Overall, this has been another strong week for both equity and bond markets, and it is pleasing to see portfolios continue to move higher. As we have highlighted previously, we continue to tread a careful path, resisting being sucked in to deploying more risk into rising markets and mindful that there are still headwinds, while returns on defensive assets offer compelling value relative to recent history.

Andy Triggs, Head of Investments

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.

In this month’s Market Commentary, Raymond James UK European Strategist, Jeremy Batstone-Carr, considers the impact of policy changes in China, plus a look at the UK equity market, the US dollar, and a spotlight on the world’s central bankers.

This morning saw the Chancellor of the Exchequer, Mr Hunt, face the media as he reflected on his first three months in the role. He set out his priorities of economic growth in the UK under the following four E’s: enterprise, education, employment and everywhere. Ambitious is certainly a word to describe his plans as he believes his strategies will help “turn the UK into the world’s next Silicon Valley”.

Staying in the UK, job strikes and walkouts became more and more common over 2022 and this has continued into the new year. We are expecting to see buses and trains strike twice just next week. The owner of Royal Mail has concluded that the recent wave of strikes at the firm has cost them £200m. Their negotiations with the communications workers union over pay and conditions has led to 18 days of walkouts over the last six months. Job cuts could be coming at the company in the magnitude of 5000-6000 as the firm looks to revamp the business. Delivering letters is no longer very profitable and the company plans to switch to greater parcel deliveries – a growing market since the increase in online shopping.

US Q4 GDP data was released on Thursday and showed the world’s largest economy grew at an annualised rate of 2.9%, which was slightly better than expected. Investors believe Q4 could be the last quarter of solid growth before we feel the lagged effects of the federal reserve’s monetary policy tightening. Retail sales have weakened over the last two months, and while the labour market remains strong, we continue to see a trend in layoffs in the largest sectors. IBM was the latest technology company to announce job cuts, with 3,900 layoffs being announced on Wednesday.

The bright spot of lower energy costs in Europe has been coupled with good news from the re-opening of China. The reversal of the country’s heavy Covid-19 restrictions has seen more movement from residents as railway commuters begin to head back to work and passenger flights quickly uptick. Indicators show activity has not recovered to pre-pandemic levels, but signs are pointing towards steady recovery in consumption and economic activity.

Unfortunately, the Ukraine/ Russia war is still prevalent as the 1-year anniversary gets closer and closer. Zelensky’s government this week has seen major reshuffling as 11 officials have resigned or been sacked. This has been as a result of Kyiv tackling corruption as Ukraine has received billions of aid and finance, but it seems officials have dipped their hands into the aid in order to fund their own lifestyles. The timing of this news will not be ideal for Zelensky as this week it was announced both the US and Germany would be sending further aid and armoured tanks in order for Ukraine to counter Russia’s planned spring attack.

We are happy to see that our strong start to 2023 has continued this week. Unlike 2022, the US market has been leading the way this week, with the S&P 500 rising over 3% and the more technology focused NASDAQ delivering 5.7% so far. The advances in markets this year is very pleasing, but we continue to cast a watchful eye over forward-looking indicators and valuations of assets. We are reminded of a quote from Howard Marks; “There are two concepts we can hold to with confidence: – Rule No. 1: Most things will prove to be cyclical. – Rule No. 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1”.

Nathan Amaning, Investment Analyst

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.