This note contains a section on recent developments, our views, what we are watching, and our portfolio strategy. These developments may not mean changes to your portfolio so please contact your Client Advisor for the latest update on your portfolio.
Markets at a glance
- In the absence of major economic data releases this week, the market’s attention will stay on the US debt ceiling negotiations. While we still see a resolution as the most likely outcome, the ongoing stalemate in Washington is raising the risk of a deal at the eleventh hour (as was the case in 2011).
- Back then, the last-minute agreement spurred market volatility with stock, bonds, gold and the US dollar all reacting to contradictory headlines. This is also a risk for 2023 but, if a deal is reached, its impact will likely fade away.
- On a more positive note, last week’s US inflation data showed further sign of easing in April. Core services and the shelter component of the Consumer Price Index have been moderating and seem to be in a downtrend, which will allow both headline and core inflation (which excludes the energy and food components) to continue easing.
- We believe this will give the US Federal Reserve (Fed) room to pause its monetary policy tightening. We think the Fed will now hold interest rates unchanged at the current level for the rest of 2023.
- In contrast, the Bank of England, which raised the bank rate by 25 bps to 4.5% last week, looks set to hike for a while longer (just like the European Central Bank). UK inflation is still just above 10%. The latest official data show that the UK economy has been nearly stalling in the first quarter of 2023. While the recessionary impulse seems less strong than anticipated at the start of the year, weak-to-no-growth will likely weigh on inflation.
Portfolios at a glance
- Over the past few weeks, the markets have largely remained steady, and our flagship portfolios have maintained their year-to-date gains, ranging between 2-5% depending on their respective risk profiles: as we've seen so far in 2023, portfolios with a higher proportion of equities have demonstrated superior performance; this is due to risk assets, particularly equities, outperforming safer assets.
- The trends we've seen for most of this year have persisted in recent weeks. Larger cap and growth-focused companies, such as those in the technology sector, continue to outperform smaller cap and value-driven equities, like those in the banking and energy sectors. Our flagship portfolios are usually more heavily invested in the former category and less in the latter, which has favourably impacted their performance. Additionally, our carefully selected equities continue to contribute positively to overall performance.
- Looking ahead, we’re maintaining a more cautious stance in the near term, given the nature of market dynamics as economies near the final stages of the cycle, where the potential for heightened market volatility often increases.
Our near-term strategy for flagship portfolios remains:
- a slight underweight equity exposure and slight overweight fixed income exposure,
- a bias towards quality investments within equities, and
- holding more developed market government bonds than riskier bonds within fixed income.
Past performance is not a reliable indicator of future returns.
Market Performance
Data as of 12/05/2023. Source: Bloomberg. Note: The Yield and P/E figures for stock markets respectively use 12m forward dividends and earnings divided by the index’s last price. For bond markets, the yield to maturity is used.
Past performance is not a reliable indicator of future returns.
Important Information
Information correct as of 12 May 2023.
This document is designed as marketing material. This document has been composed by Brown Shipley & Co Ltd ("Brown Shipley”). Brown Shipley is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales No. 398426. Registered Office: 2 Moorgate, London, EC2R 6AG.
This document is for information purposes only, does not constitute individual (investment or tax) advice and investment decisions must not be based merely on this document. Whenever this document mentions a product, service or advice, it should be considered only as an indication or summary and cannot be seen as complete or fully accurate. All (investment or tax) decisions based on this information are for your own expense and for your own risk. You should (have) assess(ed) whether the product or service is suitable for your situation. Brown Shipley and its employees cannot be held liable for any loss or damage arising out of the use of (any part of) this document.
The contents of this document are based on publicly available information and/or sources which we deem trustworthy. Although reasonable care has been employed to publish data and information as truthfully and correctly as possible, we cannot accept any liability for the contents of this document, as far as it is based on those sources.
Investing involves risks and the value of investments may go up or down. Past performance is no indication of future performance. Currency fluctuations may influence your returns.
The information included is subject to change and Brown Shipley has no obligation after the date of publication of the text to update or amend the information accordingly. Accordingly, this material may have already been updated, modified, amended and/or supplemented by the time you receive or access it.
This is non-independent research and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
All copyrights and trademarks regarding this document are held by Brown Shipley, unless expressly stated otherwise. You are not allowed to copy, duplicate in any form or redistribute or use in any way the contents of this document, completely or partially, without the prior explicit and written approval of Brown Shipley. Notwithstanding anything herein to the contrary, and except as required to enable compliance with applicable securities law. See the privacy notice on our website for how your personal data is used (https://brownshipley.com/en-gb/privacy-and-cookie-policy).
© Brown Shipley 2023
.png?width=650&resizemode=force)