The week in review

The week of 17 April 2023 saw contradictory reports from the US as the labour market showed signs of cooling, but business activity expanded more than expected. Central banks remained hawkish with further rate rises expected in May.
Published 25 April
5 mins

What’s happened in markets?

FTSE All Share0.535.012.346.805.0015.174.79
Euro Stoxx 500.415.767.5916.9916.3219.958.13
S&P 500-0.093.384.498.20-4.3116.5711.04
Japan Topix0.816.596.788.768.2615.545.54
MSCI Asia Pac.-2.142.45-5.692.67-5.215.24-0.03
MSCI Emerg. Mkts.-1.953.21-4.893.09-6.826.60-0.72
Jo’burg All Shares-1.065.95-0.258.3110.9322.5710.32
UK Gov’t Bonds-0.94-2.57-2.450.05-15.01-10.37-3.09
US Gov’t Bonds-0.250.460.282.66-1.89-4.660.87
Global Corp. Bonds-0.110.900.003.15-1.49-1.571.58
Emerg. Mkt. Local-0.812.11-0.024.661.570.46-1.03
Figures in the respective local currencies as at the end of trading on 21/4/2023.

In the US, weekly jobless claims rose more than expected, up 5,000 to 245,000, suggesting a possible cooling in the labour market. Continuing claims were also up reaching 1.87 million, the highest level since November 2021. Investors seemed unsure whether to read this as good news, leading to slowing interest rate hikes, or bad news in the form of a possible recession.  However, the S&P Global measures of economic activity told a very different, more upbeat story on Friday. The S&P Global Flash US Composite Purchasing Managers’ Index (PMI), which measures both services and manufacturing activity, revealed business activity had expanded at a stronger pace than expected in early April rising to 53.5, its highest level in almost a year. This was attributed to stronger demand, improving supply chains and a steeper uptick in new orders.

However, there was a hawkish tone from Federal Reserve (Fed) officials ahead of next week’s central bank policy meeting. Cleveland Fed President Loretta Mester said she anticipated “monetary policy will need to move somewhat further into restrictive territory this year” to put inflation on a sustained downward trajectory. This sentiment was echoed by Philadelphia Fed chief Patrick Harker who said “that some additional tightening may be needed to ensure policy is restrictive enough”.

In the UK, inflation remained sticky and fell less than expected as the consumer price index came in at 10.1% for March, above the 9.8% expected, meaning the UK now has the highest inflation rate in western Europe. Core inflation (excluding energy and food) was above expectations as well at 6.2%, unchanged from February. The week also saw weaker than expected retail sales which fell 0.9% in March, as consumers continued to rein in their spending in the face of persistent high inflation and rising borrowing costs. Economists now  expect the Bank of England to raise rates by a further quarter point to 4.5% at its next Monetary Policy Committee meeting in May.

In the eurozone, a further rate hike is also expected from the European Central Bank next week. Business activity in the region expanded faster than expected in April with stronger demand, easing pressure on prices, and a growth in employment. Although an S&P Global survey showed the expansion was driven by stronger growth in the services sector, while the manufacturing sector lagged. 

In other news, China’s economy expanded 4.5% in the first quarter as Q1 gross domestic product (GDP) numbers came in above the 4.0% forecast, supported by strong retail sales growth indicating a consumer-led-post-Covid recovery. Meanwhile, Credit Suisse investors representing US$4.5 billion of bonds wiped out during the emergency takeover are suing the Swiss regulator.

In corporate news, earnings reports included Goldman Sachs Group whose net revenue for the first quarter came in below estimates, with fixed income, currency and commodity (FICC) sales and trading revenue also falling below expectations. Elsewhere, Bank of America’s trading revenue beat expectations and overall revenue was up 9% to US$5.1 billion. Away from the financials, results were also mixed as Johnson & Johnson and Tesla dropped below expected earnings while IBM and Procter & Gamble exceeded them.

Broadly speaking it was another positive week in terms of risk assets and returns. There was little to differentiate developed markets (+4.3%) and emerging markets (+4.2%) over the last 30 days. Interestingly, there was a slight shift in terms of style with value (+4.8%) now outperforming growth (+3.9%) over the shorter term, following strong performance from energy (+6.8%) and materials (+6.3%). Meanwhile large capitalisation stocks (+4.4%) continued to lead small caps (+3.0%) over the same period. Energy (+6.8%) was the best performing sector over the last 30 days and communication services (+2.2%) was the worst.

In fixed income, US yields shifted upwards over the last week following hawkish comments from  a number of Fed speakers suggesting that more rate hikes were on the horizon.

Gold continued to see support while oil headed for the first weekly loss since last month’s banking crisis, weighed down by concerns over demand.

In terms of currencies, the weaker than expected retail sales data in the UK put pressure on sterling.




UK GDP (QoQ)0.1
UK PMI53.9
UK CPI (YoY)10.1
EU GDP (QoQ)0.00.2
EU PMI54.4
EU CPI (YoY)6.9
US GDP (QoQ)2.62.0
US PMI51.252.0
US CPI (YoY)5.0

What’s happened in portfolios?

We’ve seen a good level of outperformance within our equity holdings on both a year-to-date and month-to-date basis, with Fundsmith Equity and Nedgroup Global Equity leading the way. We retain our preference for quality growth areas as opposed to value over the mid-term, primarily as these position us more towards cyclically stable or defensive areas which may perform better in an environment of slower economic growth.

It remains a supportive environment for fixed income where our longer duration managers continue to outperform. Although in the shorter term we’ve seen a slight pick-up in yields, we’ve also seen a widening in credit spreads. Longer dated government bonds are doing well, particularly in the year to date, and that’s where we have more of a bias in portfolios, alongside better quality investment grade bonds.

In terms of real assets, we have started to see a little more support over recent weeks. The investment bank Stifel released a positive report on Target Healthcare REIT last week stating the rebased dividend, alongside the quality of the portfolio, had created a platform for growth over the medium term.

Alternative strategies have also picked up on a month-to-date basis with a number of our investment trusts posting high single digit returns, including Gresham House Energy Storage Fund and SDCL Energy Efficiency Income Trust. Hipgnosis Songs Fund and GCP Asset Backed Income Fund also gained support. We are now seeing positive buyer pressure returning to the investment trust space.

What's happening this week?

25 April • UK CBI Business Optimism Index | 28 April • EU GDP Growth Rate | 28 April • US PCE Price Index

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.

If you would like to find out more about how we manage clients’ investments, please contact us on the same number as above. Or you can get in touch using the links to the forms towards the end of this page.

Sources: Nedbank Private Wealth and (1) Bloomberg, (2) Reuters, (3) Financial Times, (4) Office for National Statistics, (5) S&P Global and (6) China Briefing

The value of investments can fall, as well as rise, and you might not get back the original amount invested. Exchange rate changes affect the value of investments. Past performance is not necessarily a guide to future returns. Any individual investment or security mentioned may be included in clients’ portfolios and is referenced for illustrative purposes only, not as a recommendation, not least as it may not be suitable. You should always seek professional advice before making any investment decisions.

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