What’s happened in markets?

FTSE All Share 0.87 -0.95 3.95 4.23 11.06 10.09 3.39
Euro Stoxx 50 2.45 2.28 9.28 18.99 32.84 14.37 7.96
S&P 500 2.62 7.49 11.81 15.77 22.32 13.93 11.57
Japan Topix 3.42 8.15 20.23 23.16 26.53 15.77 7.73
MSCI Asia Pac. 3.02 5.04 8.49 7.47 4.20 3.30 1.02
MSCI Emerg. Mkts. 2.93 5.61 10.40 8.97 5.63 4.20 1.27
Jo’burg All Shares 1.98 0.39 8.95 9.31 21.44 19.12 10.46
UK Gov’t Bonds -0.93 -3.38 -6.76 -3.98 -13.70 -11.74 -4.20
US Gov’t Bonds -0.02 -1.18 -0.48 1.78 -0.62 -4.51 0.58
Global Corp. Bonds 0.22 -0.07 1.07 2.91 2.31 -2.77 1.49
Emerg. Mkt. Local 0.72 0.77 5.16 6.90 10.58 -1.13 1.01
Figures in the respective local currencies as at the end of trading on 09/06/2023.

In the US, the main event was inflation with May’s prices up 4% year on year, their slowest pace since March 2021. Although still double the Federal Reserve’s target of 2%, the figure was slightly below the 4.1% expected and down from 4.9% in April. In terms of other data, US weekly jobless claims were unchanged from the previous week at 262,000, their highest level since late-2021.

With encouraging signs of continued growth in the economy and falling inflation, the Federal Reserve (Fed) announced a pause in rate hikes at its June meeting, after 10 consecutive increases. Although it appears it will be a ‘skip’ rather than a prolonged pause as Fed chair Jerome Powell noted that “nearly all” committee members expect it will be “appropriate to raise interest rates somewhat further by the end of the year”.

In the UK, the economy rebounded as monthly gross domestic product (GDP) growth for April came in at 0.2%, following a 0.1% contraction in March. However, this data was rather overshadowed by the wages data released the day before, which reported record wage growth of 7.2%, the highest year-on-year growth since records began. With the stronger-than-expected labour data and signs of economic growth, forecasts are for the Bank of England (BoE) to raise rates for the thirteenth consecutive time at its June meeting. BoE governor Andrew Bailey commented on the continued tightness in the labour market and said that inflation will come down but it’s “taking a lot longer” than expected.

As expected, the European Central Bank (ECB) announced another 25 basis points rate rise from 21 June 2023, taking its key deposit rate to 3.5%, its highest level since 2001. ECB president Christine Lagarde commented after the meeting that policymakers “still have ground to cover” and that further increases were likely in July.

Elsewhere, The People’s Bank of China cut its one-year medium-term lending facility rate by 10 basis points to 2.65%, as Beijing attempts to shore up its shaky economic recovery. The Bank of Japan, meanwhile, maintained its loose monetary policy and ultra-low interest rates despite stronger-than-expected inflation, but this dovish decision led the Japanese yen to weaken.

On the corporate front, artificial intelligence (AI) continues to be a prominent trend, as Oracle reported strong sales figures and raised its guidance to the surging demand for AI infrastructure. Adobe also reported record revenue after adding generative AI technology to Photoshop.

In other news, BlackRock, the world’s biggest asset manager, pushed further into cryptocurrencies by filing an application with the US Securities and Exchange Commission to offer a bitcoin exchange-traded fund (ETF). If the application is successful, the fund will trade on the Nasdaq exchange and be the first publicly traded bitcoin ETF in the US.

In the market roundup, emerging market equities (+5.9%) gained traction after China cut rates to promote stimulus, while developed markets (+5.2%) remained strong especially in the technology space. In terms of style, growth (+6.9%) continued to benefit from the strong performance of technology stocks and outperformed value (+3.7%), while large cap stocks (+5.5%) outperformed small caps (+4.7%). Information technology (+11.6%) remained the best performing sector while real estate (-2.3%) was the worst over the last 30 days. Gold (-1.2%) has been weak as the opportunity cost of holding it increases as interest rates rise. In the fixed income market, bond returns have been much lower than equity returns of late. The risk-on tone and concerns over inflation have led government bonds to underperform.

Latest Consensus


UK GDP (QoQ) 0.1
UK PMI 54.0 53.6
UK CPI (YoY) 8.7 8.4
EU GDP (QoQ) -0.1
EU PMI 52.8 52.5
EU CPI (YoY) 6.1
US GDP (QoQ) 1.3 1.4
US PMI 50.3
US CPI (YoY) 4.0

What’s happened in portfolios?

Within equities, our more cyclical exposures have been the outperformers over the month given the risk-on environment. Our value manager Dodge & Cox Global Stock Fund has benefited from its overweight to financials, some of which were up between 8 to 12%. It was also helped by an overweight to China, as Asian markets have been doing well since The People’s Bank of China lowered its short-term lending rate. Our emerging markets manager, TT Emerging Markets Equity Fund, also outperformed due to its China exposure.

In fixed Income, the more hawkish rhetoric from central banks pushed yields higher, triggering our longer duration funds, which are more sensitive to interest rate rises, to underperform our shorter duration ones, both in investment grade credit and government bonds.

For real assets, our indirect holdings in property and infrastructure, through the Nedgroup Global Property Fund and ATLAS Global Infrastructure, were the outperforming areas. Given the risk-on environment, they followed equities higher and gave a positive return. Meanwhile, our direct holdings in commercial property and renewables were negative and underperformed due to the higher yields, particularly in the UK.

Interestingly, within our alternative strategies, Gore Street Energy Storage Fund released its Q1 2023 update, and its net asset value (NAV) increased last quarter, despite its discount rate rising by 1.8% since the end of last year. This indicates that higher yields are filtering through to what our investment trusts use for their valuations.

What’s happening this week?

21 June • UK Inflation Rate | 23 June • EU HCOB Flash Purchasing Managers’ Indices | 23 June • US S&P Flash Purchasing Managers’ Indices