Market Insight 2023

Ask any seasoned investor and they will tell you this year has been particularly tricky to call. Our investment team were recently in a meeting with a 20-year economics veteran at one of the largest investment houses in the city. They presented a powerful set of charts, correlations and predictions for the next 6-12 months. This economist went on to say at the end of the meeting that, candidly, they didn’t actually believe any of the economic data they had just presented on and it could go “either way”. That’s not to say they didn’t know or didn’t care but...

‘We meet again, Mr. Bond’, is a phrase from one of the UK’s greatest franchises, James Bond, which immortalised in encounters with Bond villains the likes of Auris Goldfinger and Ernst Blofeld. Now, as much as I would love to write a note about James Bond and the truckload of speculation about the next casting for this great UK franchise, I will instead look at the nuance in the phrase. In the world of finance, the villain currently is the bond market, with so many experienced investors having been hurt this year from buying into the bond market rally after...

AI, what is it and what’s changed? AI has been a conversation in the academic community since the 1950s when Alan Turing published a paper in which he proposed the ‘Turing Test’. This test was designed to determine if a machine could exhibit intelligent behaviour indistinguishable from human behaviour. This concept has been slowly developing for decades, but progress made in the last 12 months in the guise of AI has consumed the market and global news feeds. In general terms, what has changed is the ability to connect the underlying technology with human language, creating an interface that is...

On face value the US market is up this year so it’s certainly a victory for the optimists but ask any portfolio manager about this market and they will tell you it’s not been this confusing for a very long time. The S&P 500 is now up 15% in 2023 and, on face value, on the cusp of another bull market from its lows back in Q4 2023. Fantastic, but why? Well, certainly 2023 started with the expectation that the number of interest rate hikes in 2022 were going to quickly tip the global economy into a 2023 recession. This...

I am sure you already knew this but, unlike humans, almost all snakes with fangs can regrow these when they get damaged or knocked out. This innocuous example of reptilian Darwinism is, in 2023, apparently now shared with the US major stock index, the S&P500! After a shocking 2022 for growth stocks, 2023’s Q1 market will go down in history as one of the most potent rallies in the history of growth investing. Specifically, the rally was sharpest in the small clutch of mega cap growth stocks coined “FANG” stocks. So, much like snakes, the S&P500 has managed to regrow...

We are now looking back on over a decade of artificially low interest rates put in place by developed country central banks, sparked by the financial crisis and a battle against deflation, thanks to China exporting low prices as globalisation took off. This period of easy money culminated in 2021 with unprecedented levels of monetary stimulus during the pandemic. There were suggestions that inflation was ‘dead’, amid an ‘everything rally’ where assets with little actual intrinsic value (such as speculative cryptocurrencies; non-fungible tokens (those strange pictures of apes if you remember); meme stocks; and a selection of profitless companies) were...

The past few years have been marked by political turbulence in the UK, ranging from ‘partygate’ scandals, to the proposed unfunded tax cuts which sent the UK economy into tailspin and Liz Truss packing after a shorter tenure than Ed Balls had on Strictly Come Dancing. However, since Rishi Sunak followed as Britain’s prime minister, there has been an air of control with no more hard-hitting headlines of political malfeasance or drastic calls for the removal of cabinet members. When Rishi took over the clear objective was to fix both Liz Truss’s and Kwasi Kwarteng’s large scale failure to sensibly...

Financial markets ended Friday in some turmoil, due to the dilemma over the strength of bank lending. In a rapidly appreciating interest rate environment, banks are usually the core winners as interest spreads and ongoing interest loan differentials cause bank profit margins to rise. Great news for banks which until Friday have been a core appreciating sector in markets globally. No mistake, rising interest rates are good for bank profits, until, that is, concerns about default rates - the ability of borrowers to cover interest payments or indeed repay loans - also begin to rise. Interest rates rising is inherently...

Globally, markets have been in a precarious place, one in which opportunities have been scarce and where we have watched economies walk the tight rope to recovery. Unfortunately, in 2022 China slipped. Weighed down by its stringent zero-Covid policy, distressed real estate sector, crackdown on tech firms, and geopolitical tensions with Taiwan. It’s no doubt, that Investors fuelled with pessimism after an onslaught of jumbo rate hikes, and the anticipation of a global recession has also delivered another blow to Chinese equities. However, the rhetoric is changing, and some optimism is resurfacing. China’s policy of zero tolerance toward COVID-19 ending...