What’s happened in markets?

FTSE All Share -5.06 -7.71 0.86 -0.81 0.67 15.17 3.89
Euro Stoxx 50 -3.87 -4.88 7.36 7.51 8.42 20.57 6.76
S&P 500 1.47 -3.84 2.11 2.40 -9.72 17.55 9.19
Japan Topix -3.55 -1.60 0.69 3.62 5.97 18.41 4.90
MSCI Asia Pac. 1.00 -3.83 0.13 0.61 -10.99 6.99 -1.16
MSCI Emerg. Mkts. -0.26 -4.61 -0.12 -0.22 -12.30 7.70 -2.06
Jo’burg All Shares -4.81 -8.08 -0.04 -0.17 1.94 25.15 8.49
UK Gov’t Bonds 2.76 2.95 1.48 3.65 -15.00 -7.88 -2.57
US Gov’t Bonds 1.60 2.58 1.18 3.20 -5.05 -3.48 0.91
Global Corp. Bonds 0.62 0.69 0.53 2.47 -5.54 -0.55 1.39
Emerg. Mkt. Local 0.31 0.11 2.87 1.97 -3.20 -0.37 -1.55
Figures in the respective local currencies as at the end of trading on 17/3/2023.

In terms of economic data, the main event in the US was inflation. The core consumer price index (CPI) for February (which excludes energy and food) came in above estimates up 5.5%, its smallest 12-month increase since December 2021, while headline CPI came in at 6.0% which was in line with expectations. Meanwhile, retail sales contracted moderately by 0.4% over February, but were up 5.4% from February 2022.

In the UK, the unemployment rate remained steady at 3.7% for the three-month period through January. However, vacancies fell over the quarter for the eighth consecutive month reflecting uncertainty across industries. On Wednesday, the UK chancellor, Jeremy Hunt, announced the government’s Spring Budget aimed at growing the economy, reducing inflation and reducing government debt. There were a number of measures seeking to address the current tight labour market by encouraging more people to stay in or return to the workforce. These included changes to the tax treatment of pension contributions and a staged rollout of wider support for childcare.

In Europe, the European Central Bank (ECB) went ahead with the expected 50 basis points increase, taking its main rate to 3%, despite doubts raised by the recent shocks in the banking sector. ECB president Christine Lagarde stressed that the European banking sector is now in a much stronger position than it was prior to the global financial crisis in 2008.  Lagarde also reiterated the central bank’s commitment to rein in inflation and that further rate hikes should be expected but the pace taken will be “entirely data-dependent”.

In corporate news, concerns around Silicon Valley Bank (SVB) eased throughout the week, but attention moved onto Credit Suisse. The Swiss bank had rattled markets early in the week when it admitted its auditors had found “material weaknesses” in its financial reporting. This was compounded when its biggest shareholder – the Saudi National Bank –refused to inject any further funds. The Swiss National Bank stepped in on Thursday with a US$54 billion emergency lifeline to shore up liquidity, after its stocks and bond prices fell sharply. The Swiss authorities also moved to steer a deal with rival UBS, who agreed, over the weekend, to take over Credit Suisse for US$3.3 billion to restore stability in the banking sector and calm global financial markets.

The week of 13 March was another volatile week in markets with risk assets under further pressure due to negative sentiment around the banking turmoil. Emerging markets (-5.1%) performed slightly better than developed market equites (-5.5%) over the last 30 days. In terms of style, value (-7.6%) fell more than growth (-3.2%), while small-caps (-8.6%) continued to underperform large-caps (-4.8%) over the same period. Information technology (-1.2%) was the best performing sector, while the more defensive consumer staples (-1.6%) and utilities (-1.9%) also performed relatively well. The value sectors of the market underperformed, as financials (-12.3%) came under most pressure along with energy (-11.9%), as oil (-15.0%) fell amid concerns over the economic outlook. Real estate (-8.4%), consumer discretionary (-7.1%) and materials (-6.7%) also lagged.

In fixed income, government bonds started to act more normally and generated a positive return as investors sought refuge from the market volatility. The start of the week saw the biggest daily decline in the 2-year Treasury yield since October 1982, down 61 basis points, and as yields go down, bond prices go up. We also saw a strong rally in the longer end.

Latest Consensus


UK GDP (QoQ) 0.0
UK PMI 53.1 52.9
UK CPI (YoY) 10.1 9.9
EU GDP (QoQ) 0.0
EU PMI 52.0 52.0
EU CPI (YoY) 8.5
US GDP (QoQ) 2.7 2.8
US PMI 55.1
US CPI (YoY) 6.0

What’s happened in portfolios?

In a volatile week across equity markets, bond markets and real assets, our more defensive stance and bias towards quality has been beneficial. We remain cautiously positioned and well diversified through our multi-asset class approach.

Within equities, we  have done well on a relative basis as our defensive, quality managers, such as Fundsmith Equity Fund, outperformed, while value was weighed down by financials. We remain underweight to equities and financials. Our regional bias to the US also worked in our favour as the US outperformed the UK and Europe ex UK. Large capitalisation stocks also outperformed small caps.

Relative performance was also strong in terms of fixed income, as the risk-off environment saw a flight to safe haven assets and bonds performing more as expected. Long duration and sovereign debt outperformed with yields falling. Credit came under pressure, particularly at the high yield end, with spreads widening.

In terms of real assets, our direct real estate holding Empiric Student Property announced a good set of results with its net asset value (NAV) up 8% over the year, to 115.4 pence per share. Occupancy is strong at 99% and we are also seeing a significant improvement in earnings per share up to 3.25 pence.

In terms of alternative strategies, we had a positive update from Gresham House Energy Storage Fund (GRID) with its NAV up 4% for the final quarter of 2022. It is also on track to meet its target of a 5% increase in dividend for next year.

What’s happening this week?

22 March • US Federal Reserve Interest Rate Decision | 23 March • UK Bank of England Interest Rate Decision | 24 March • EU S&P Global Flash PMIs