Select Portfolio Commentaries

In August, market volatility increased, reflecting renewed stress in the Chinese property market, weak macroeconomic data out of China and an increase in government bond yields. Chinese authorities have acted by reducing interest rates twice in August as well as undertaking initiatives to support markets, but investors remain cautious, given the difficulties facing the largest Chinese property companies, Country Garden & Evengrande.

For the first time in 2023, emerging market equities outperformed developed markets. Predominantly this was due to the Chinese authorities pledging to boost and support the areas of the economy that most need it, which includes the ailing property sector. Overall, global equities made positive returns, receiving a boost from lower than expected inflation figures in the US and UK in particular.

Most equity markets made positive returns in June. The best performing equity market was the US, where technology stocks have continued to benefit from the investor enthusiasm for Artificial Intelligence. However, China and Asia Pacific ex Japan fell. Chinese equities fell as investors have been disappointed with the growth achieved after the country removed the last of its Covid restrictions and concerns remain about the ailing property sector. This had a knock on effect in the Asian markets.

With the exception of the US, Japan and some Asian markets, global equities declined in May as a mixture of economic data impacted investor sentiment. On the one hand, expectations for technology and in particular Artificial Intelligence (AI) aided some, but declining manufacturing output data, along with falling commodity process impacted others. Furthermore, with inflation still proving to be sticky, and expectations of further interest rate rises, Government bond yields continued to rise, which subsequently meant capital values fell.

April was a positive month for global equities overall, as better than expected and robust economic data aided investor sentiment. Concerns about the banking sector dissipated in the UK and this led to a recovery in this sector, albeit this was not the case in the US where the worries persisted.

Equities suffered from a disorderly sell off and a marked increase in volatility as concerns about the US and European banking sectors surfaced. In the US, Silicon Valley Bank (SVB) collapsed and immediately caused investor’s concern about the health of the US financial system, despite reassurances from the US Federal Reserve. Banking stocks subsequently fell and depositors took money out of SVB at a faster rate than they could deliver, which led to them selling assets at a loss to meet their liabilities.