| KEY MARKET MOVEMENTS (% change) | |||||||
| 1WK | 1MO | 3MO | YTD | 1YR | 3YR | 5YR | |
| FTSE All Share | -1.87 | -0.38 | 1.45 | -1.43 | 0.69 | 1.85 | 3.12 |
| Euro Stoxx 50 | -3.52 | -1.80 | 9.16 | -8.42 | -6.32 | 3.20 | 4.59 |
| S&P 500 | -2.05 | -2.53 | -0.11 | -17.90 | -16.16 | 8.19 | 9.45 |
| Japan Topix | -0.58 | -0.66 | 1.68 | 0.36 | -0.54 | 6.45 | 4.12 |
| MSCI Asia Pac. | -1.90 | 2.37 | 3.25 | -19.05 | -18.32 | -0.24 | 0.31 |
| MSCI Emerg. Mkts. | -2.09 | 0.55 | 1.85 | -19.89 | -19.17 | -1.52 | -0.33 |
| Jo’burg All Shares | -1.97 | 0.12 | 9.37 | 3.84 | 7.14 | 13.08 | 8.88 |
| UK Gov’t Bonds | -1.38 | -2.94 | -1.33 | -22.20 | -24.23 | -7.21 | -3.06 |
| US Gov’t Bonds | 0.68 | 1.92 | 0.82 | -10.71 | -10.89 | -1.98 | 0.26 |
| Global Corp. Bonds | 0.15 | 2.28 | 1.90 | -12.45 | -12.57 | -1.98 | 0.90 |
| Emerg. Mkt. Local | -0.05 | 2.84 | 3.81 | -11.02 | -10.59 | -4.68 | -1.28 |
| Figures in the respective local currencies as at the end of trading on 16/12/2022. | |||||||
The week of 12 December started well with improved headline inflation in the US. The consumer price index (CPI) data released on Tuesday 13 December showed inflation cooler than expected up only 0.1% month on month, against the 0.3% increase expected. Annual inflation at 7.1% was the lowest level since December 2021 and below the 7.3% expected. Despite this good news, the Federal Reserve (Fed) went ahead with a 50 basis point increase in interest rates later in the week. Although slower than the 75 basis point increases in its previous four meetings, Fed chair Jerome Powell released a hawkish statement stressing the need for further rate hikes to contain the inflationary pressures of a persistently tight labour market. The number of first-time unemployment claims fell last week to 211,000, a decrease of 20,000 from the previous week. Although a notoriously volatile measure, particularly around the holidays, it is not encouraging news in the battle to rein in inflation.
In the UK, the economy is estimated to have grown by more than expected in October as gross domestic product (GDP) rose by 0.5%, slightly more than the 0.4% anticipated. However, looking at the broader picture, GDP fell by 0.3% in the three months to October 2022 compared with the three months to July 2022. The Bank of England (BoE) also raised its rates by 50 basis points to a 14-year high of 3.5%. This is its ninth consecutive increase, but there was some difference of opinion within the monetary policy committee as six voted for the increase, two voted to leave it unchanged and one voted for a 75 basis points increase. Despite signs UK inflation may have peaked, down to 10.7% in November, the BoE echoed the hawkish sentiment of the Fed.
The story was the same in the EU area as the European Central Bank (ECB) also raised its key interest rate by 50 basis points to 2%. Although lower than its previous two 75 basis point increases, the message from ECB president Christine Lagarde was that rates will still have to rise significantly at a steady pace to bring inflation down to its 2% target.
| ECONOMICS | ||
| Latest | Consensus Forecast | |
| UK GDP (QoQ) | -0.2 | -0.2 |
| UK PMI | 49.0 | – |
| UK CPI (YoY) | 10.7 | – |
| EU GDP (QoQ) | 0.3 | – |
| EU PMI | 48.8 | – |
| EU CPI (YoY) | 10.1 | – |
| US GDP (QoQ) | 2.9 | 2.9 |
| US PMI | 56.5 | 55.0 |
| US CPI (YoY) | 7.1 | – |
The hawkish rhetoric from the Fed and the ECB later in the week started to filter through into equity markets and created a risk off environment more broadly. On the back of that, it was the defensive plays which performed best with our quality focused large capitalisation managers outperforming. They give better margin protection, a possibility of cash flows and less leverage, allowing them to weather a storm if we did start to see a recessionary outlook priced in. With the shift in focus away from inflation towards recession, those companies did particularly well.
In terms of real assets, it was the more defensive infrastructure investments that held up well over the last week. This included Atlas Global Infrastructure, which offered good downside protection for portfolios, and the renewable names which are driven by structural tailwinds. The cyclical environment over the last week was particularly supportive of renewables, with Greencoat UK Wind and John Laing Environmental Assets Group performing well and offering a good amount of protection for portfolios. We have taken further steps to reduce the cyclicality within real assets by reducing our exposure to global REITs and UK commercial property. The receipts from these sales were moved into fixed income as another defensive move to reduce the economic sensitivity within real assets and the portfolio.
20 December • EU Consumer Confidence | 21 December • US Consumer Confidence | 22 December • UK GDP Growth Rate
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Sources: Nedbank Private Wealth and (1) Bloomberg, (2) Reuters, (3) Office for National Statistics and (4) US Bureau of Labor Statistics
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