What’s happened in markets?

FTSE All Share 3.00 -2.84 3.08 3.08 2.80 13.88 4.99
Euro Stoxx 50 4.46 2.01 14.32 14.32 14.72 19.14 8.54
S&P 500 3.50 3.67 7.48 7.48 -7.75 18.58 11.15
Japan Topix 3.54 1.57 7.07 7.07 5.57 15.29 5.63
MSCI Asia Pac. 1.52 3.47 4.34 4.34 -8.63 7.25 0.35
MSCI Emerg. Mkts. 1.93 3.04 3.97 3.97 -10.39 8.17 -0.57
Jo’burg All Shares 2.15 -1.23 5.19 5.19 5.10 24.42 10.57
UK Gov’t Bonds -1.45 2.86 2.05 2.05 -16.27 -9.12 -3.06
US Gov’t Bonds -0.55 2.89 3.01 3.01 -4.51 -4.20 0.74
Global Corp. Bonds -0.05 2.13 3.14 3.14 -4.98 -0.28 1.46
Emerg. Mkt. Local 1.08 3.94 4.81 4.81 -1.37 0.97 -1.21
Figures in the respective local currencies as at the end of trading on 31/3/2023.

In the US, there was positive news on inflation as the core personal consumption expenditures (PCE) price index, the Federal Reserve’s (Fed) preferred measure of inflation which excludes food and energy, was up 0.3% over the month to come in at 4.6% for February, below expectations of 4.7%. The headline PCE was up 5% year on year, beating market expectations and down from January’s 5.3%.  While showing encouraging signs of cooling, there is still a way to go to reach the Fed’s long-term inflation target of 2%. US consumer confidence increased unexpectedly in March rising to 104.2, better than the 101.0 forecast. Although the cut-off date for the survey was 20 March, 10 days before the collapse of the Silicon Valley Bank.

Eurozone headline inflation in March fell sharply to its lowest level for a year at 6.9% (down from 8.5%) as energy costs eased. But the news on core inflation (excluding more volatile food and energy) was less positive rising to a record high of 7.5%, from 7.4% in February. European Central Bank (ECB) chief economist Philip Lane said he expects the recent turmoil in the financial sector to “settle down”, but that more increases in interest rates will be needed to bring inflation back to the ECB’s 2% target.

In the UK, Andrew Bailey, the governor of the Bank of England (BoE), dismissed the prospect of an imminent financial crisis and highlighted that the recent turmoil was “very different” to the events of 2008. He stated the central bank was “in a period of very heightened tension and alertness” but added that the UK banking system remained resilient and able to support the economy.  He said the failure of Silicon Valley Bank (SVB) had been one of the swiftest he’d seen but insisted the events in the banking industry would not distract the central bank from its focus on reining in inflation.

In corporate news, shares in First Citizens Bank jumped over 49% after its agreement to buy SVB Financial Group’s Silicon Valley Bank, ending Monday up by more than 53%. First Republic Bank also jumped, by 27% when markets opened, after a Bloomberg report that US authorities were considering an expansion to their emergency lending facility which would offer banks more support.

In other news, the Organization of the Petroleum Exporting Countries (OPEC+) announced a surprise oil production cut of more than a million barrels a day on Sunday 2 April. Oil prices leapt by 8% when trading opened in Asia on Monday morning following the Saudi-led initiative but has since settled.

In terms of markets, emerging markets (+2.6%) performed slightly better than developed markets (+1.9%) over the last 30 days. In terms of style, value (-1.1%) continued to underperform growth (+5.2%), while small-caps (-3.2%) underperformed large-caps (+2.8%) given their greater cyclicality has continued. Technology stocks remained the best performers with information technology (+8.0%) and communication services (+7.2%). Financials (-7.1%) continued to be the worst performing sector over the last 30 days, despite recovering strongly over the last week.

In fixed income, falling government bond yields across the globe has been supportive for longer duration sovereign bonds due to the recent flight to quality. Long duration government bonds (+2.6%) outperformed short duration (+1.1%) over the last 30 days.

The week also saw good performance from other safe haven assets such as gold (+8.2%) over the last 30 days on the back of lower bond yields. Prices briefly slipped back last week but have seen a second straight quarterly rise as the Fed has been dovish following the banking turmoil. Oil (-3.3%) continued to fall due to its cyclical nature, but this was prior to the OPEC+ decision over the weekend.

Latest Consensus


UK GDP (QoQ) 0.1
UK PMI 52.2 52.2
UK CPI (YoY) 10.4
EU GDP (QoQ) 0.0
EU PMI 54.1 54.1
EU CPI (YoY) 6.9
US GDP (QoQ) 2.6
US PMI 55.1 54.3
US CPI (YoY) 6.0

What’s happened in portfolios?

We remain cautiously positioned and more defensive both across and within asset classes. As we anticipate that continued tightening monetary policy will slow economic growth and lead to banks becoming more conservative with their balance sheets.

Equities have been fairly unsettled over recent weeks but received a bit of support over the last week where risk assets have shown some strong performance. The ongoing risk-off environment has meant our defensive quality managers, Fundsmith Equity and Morgan Stanley Global Brands, stood out. Dodge & Cox were well supported by energy and financials over the last week but continued to underperform due to its exposure to cyclical European banks over previous weeks.

Within fixed income, our increased exposure to safer government bonds has benefited from the fall in yields, which has meant our longer dated funds both in government and investment grade bonds have outperformed our shorter dated ones.

In our real asset holdings, Target Healthcare announced its latest net asset value (NAV), which was down 5%, and rebased its dividend to 5.6p. Management is focused on building value through the existing portfolio rather than expanding more widely at present. We are confident that the fund holds quality assets so has a strong long-term outlook.

Within our alternative strategies, we had a positive meeting with Gore Street Energy Storage Fund where we discussed its commitment to de-risking the portfolio and diversifying further globally. There are a number of construction assets in the pipeline, and while the assets have been predominately held in the UK and mainland Ireland, the fund is looking to allocate more towards the US.

The US market presents significant opportunities within the renewable energy storage space, particularly with the Biden administration’s Inflation Reduction Act passed in August 2022, which will provide about US$370 billion in funding and subsidies for green technologies. In addition, there are the energy security challenges the country faces during stress from extreme weather events such as hurricane seasons.

What’s happening this week?

4 April • EU PPI (Feb) | 5 April • UK S&P Global PMI (Mar) | 6 April • US Nonfarm Payrolls (Mar)