This note contains an overview of our market 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.
At a glance
What we’re watching
Important Information
Information correct as of 16 October 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
At a glance
- So far, the latest bout of geopolitical uncertainty, triggered by the Israel-Hamas conflict, has had a moderate and short-lived impact on markets. While oil prices did rise at the end of last week, they remain lower than a month ago. Equities did rise, though several market sessions were rather volatile. Bond prices rose slightly, perhaps a sign that of investors turning more cautious. Our flagship portfolios followed suit and ended the week up.
- We believe the main market risk is if the conflict broadens to other countries in the region. This could impact oil flows and, in turn, push inflation higher. This matters because a spike in inflation could lead to a decline in the price of riskier assets, such as equities, if central banks decide increase interest rates further or investors start to focus on slowing economic activity.
- Should this occur, investors would likely turn to safer assets such as high-quality government bonds and low-volatility stocks, both of which we hold in portfolios to a greater extent than in our typical long-term allocation. This defensive positioning allows us to partly absorb market shocks (such as the past week’s events) and, if sustained, even outperform, as was the case this year in March when the US banking sector faced some turmoil.
- Our portfolio positioning has not changed. We still hold more high-quality government bonds and fewer stocks relative to our long-term strategy. Most of the stocks we hold are in the US, a high-quality market, and we also have exposure to low-volatility stocks.
- While this defensive positioning was not necessarily set up with a rise in geopolitical tensions in mind, it does provide a cushion should market volatility continue. Our short-term view, and one key reason for our defensive positioning, is that a mild recession is likely in the UK, Eurozone and, to a lesser extent, the US. As growth slows, equities tend to come under pressure (hence, we hold fewer equities than normal), while high-quality government bonds tend to provide a good return for a relatively low risk (hence, we hold more government bonds than normal).
- It’s worth noting that, given our sustainable investing policy, we only have a relatively minor direct exposure to the oil market. So, should oil prices rise, we will focus on the impact that this will have on other asset classes to seize opportunities and mitigate risks.
- Year-to-date, our global stock selection – quality companies with solid fundamentals – has outperformed, while giving back some gains in September as equity markets sold off. Our flagship portfolios are the sum of all these parts working together and complementing each other.
What we’re watching
- Last week, US headline inflation for September was slightly higher than the consensus expected, while core inflation (excluding food and energy) eased. US retail sales data is out this week. Investors will focus on whether the summer spending splurge has now subsided, and the economy is slowing. This will likely affect what the US Federal Reserve does next with interest rates. We think we’re at or close to the peak in interest rates.
- UK inflation data is also out this week. Economists expect it to have slowed again, though it may have remained too high for the Bank of England’s liking. While we see the possibility of an additional increase in the Bank Rate, a steeper-than-expected decline in inflation could cement the view that interest rates have reached a plateau in the UK.
- Finally, the Q3 economic growth report for China is out on Wednesday this week too. We expect that the lacklustre economic trajectory we’ve seen recently has continued. We recently lowered our exposure to Asia-Pacific equities due to increasing woes in China’s housing sector and the lack of meaningful policy support from the People’s Bank of China.
Important Information
Information correct as of 16 October 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