Monthly Market Commentaries

The Chancellor of the Exchequer, Jeremy Hunt, presented the Autumn Statement to Parliament on the 17th November 2022.

This Autumn Statement follows Kwasi Kwarteng’s September ‘mini-Budget’ which Mr Hunt effectively cancelled on becoming Chancellor, and takes place against a backdrop of talk of a return to austerity at the same time as the UK seems to be on the verge of a long recession and RPI inflation is at its highest since December 1980.

Earlier this year, following Rishi Sunak’s Spring Statement, a full Budget was expected to take place this autumn, but it now seems that 2022 will join 2019 as the only years in the last two centuries without a full UK Budget.

This snapshot gives you a summary of the key points announced by the Chancellor from the dispatch box. More details are available from GOV.UK.

October saw a rally in developed market equities, but in stark contrast emerging market equities fell. Chinese equities were particularly weak as President Xi reiterated that his zero-Covid policy would continue to be enforced for the foreseeable future.

It was also another disappointing month for global bonds. Albeit the UK bucked this trend, as Gilt valuations rose, their yields fell, with the market reacting positively to the appointment of Rishi Sunak as Prime Minister and the expectation of greater fiscal responsibility.

After rallying in the previous month, equities and bonds registered negative returns in September. Asian and Emerging Markets were the worst performing equity indices, but all major global equity indices posted negative returns. Whilst the returns on global bonds were not as bad as equities, the hopes of interest rate cuts dissipated as central banks reaffirmed their commitment to fighting persistently high levels of inflation. The US Federal Reserve (Fed), European Central Bank (ECB) and Bank of England (BoE) all raised interest rates again.

After posting positive returns in July, equities became more volatile in August as it became clear that further interest rate rises may be needed to tame inflation, with expectations that these rises may need to be substantial. However, emerging market and Japanese equities posted reasonable gains. Bond yields rose, meaning prices fell, which impacted portfolio valuations.

Equities in developed markets posted gains in July as investors began to focus on the signs of a slowing global economy and the potential for interest rates cuts by central banks should current inflationary pressures ease.

As Q2 2022 came to an end, both shares and bonds remained under pressure as investors factored in further interest rate rises, increased risk of recession and inflation continuing to move higher in most major economies. Generally, global equities fell during the month, with Chinese shares proving to be the exception as prolonged lockdowns were lifted in some of the major cities.