Select Portfolio Commentaries

Equities suffered from a disorderly sell off and a marked increase in volatility as concerns about the US and European banking sectors surfaced. In the US, Silicon Valley Bank (SVB) collapsed and immediately caused investor’s concern about the health of the US financial system, despite reassurances from the US Federal Reserve. Banking stocks subsequently fell and depositors took money out of SVB at a faster rate than they could deliver, which led to them selling assets at a loss to meet their liabilities.

The UK and Europe markets were amongst the stronger performing major regional equity markets, whilst the Emerging Markets and Asia ex Japan equity indices gave back some of their relative out performance from earlier in 2023. Government bond prices fell in February as yields rose. However, GDP forecasts were revised upwards after better than anticipated economic activity predominantly in the US and China was recorded.

Both developed and emerging market equities had a strong start to 2023.

Investor sentiment has been boosted by China’s relaxation of the zero- Covid policy. China has also eased its regulatory crackdown on technology companies and offered support to the distressed property market. In addition, it is anticipated that the Central Banks are nearing the peak of their interest rate hiking cycle, which assisted both equities and bonds, where yields fell and prices rose.

After a market rally the previous month, most equity markets remained volatile in December and finished lower. China proved to be the exception as shares were boosted by the relaxation of its zero-Covid policy and the announcement of further support for the ailing property market. Central Banks hawkish rhetoric impacted the performance of bonds as they reiterated plans to continue on the course of tighter monetary policy despite inflation showing signs of having peaked. Thus, bond yields rose, and their prices fell.

The better than expected US inflation figures led to a rally in equity markets.

On the day the data was released the American S&P 500 and Nasdaq 100 indices were up 5% and 7% respectively. The latter was a relief for technology stocks, which have been amongst some of the worst performing during 2022.

After a volatile start to October, stock markets ended on a positive note. Developed market equities returned 7%, and although emerging market equities fell 3%, these still recovered from a more severe fall at the start of the month. However, geopolitical risks remained at the forefront of investors’ minds, with tensions between Russia and Ukraine escalating. Furthermore, leading economic indicators have shown a slowdown in developed market activity and therefore an increased risk of recession.