Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
It was a good week for equities, with all major stock markets up. Europe gained almost 5%, and the US was up 2.5%, adding to a run that put the S&P 500 up 9% over the last month. Bonds were also positive for the week. Drivers included: concerns about inflation receding as commodities weaken and investors questioning whether they are too pessimistic.
The Bank of America released its Monthly Fund Manager Survey, showing cash holdings had reached their highest levels since 9/11, while their equity exposure was at the lowest levels since the global financial crisis of 2007–2009. The news sparked a wave of short covering, as investors who had been betting that stocks would go down closed out positions.
Liz Truss ousted Penny Mordaunt in the race to be Conservative leader and the UK’s next Prime Minister, leaving her up against former chancellor Rishi Sunak in the final vote. The focus now shifts to about 175,000 grassroots Tory members, who will make the final choice before the winner is announced on 5 September.
UK annual inflation accelerated to 9.4% in June 2022 (vs. 9.3% expected), the highest rate since 1982. The highest price increases were seen in motor fuel, then food, while prices decreased for second-hand cars. For the month, consumer prices increased 0.8% (vs. 0.7% expected).
The European Central Bank (ECB) raised interest rates by 0.5%, the first increase since 2011, ending eight years of negative rates in an attempt to bring inflationary pressures under control. The ECB also said that further increases in interest rates should be expected in the upcoming meetings.
Russia and Ukraine signed an agreement to resume grain exports from Ukrainian ports in the Black Sea. The safe trade corridor will allow Ukraine to export over 20 million tonnes of grain reported to be accumulated in port silos since the war started on the 24th of February while clearing stockpile space for the coming wheat harvest.
The Financial Conduct Authority (FCA) revealed that it is extending the process to introduce sustainability disclosure requirements for asset managers and ESG labelling rules for investment products, pushing back the consultation on the proposals until the autumn. This will give the FCA time to consider new, similar proposals from the EU and the International Sustainability Standards Board (ISSB).
It will be one of the busiest weeks of summer in the US. We have the US Central Bank meeting, the Q2 GDP growth rate being released, and earnings reports for more than one-third of S&P 500 companies taking centre stage. Also, Eurozone’s largest economies, including Germany, France, Italy, and Spain, will be publishing key reports on growth and inflation rates.
Sources: Multi Asset Investment Team, Financial Times, The Wall Street Journal, PIMCO, T.Rowe Price, Morningstar, Trading Economics, ESG Today.
Risk Warning: These are Nathan’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
Regulatory Information: This is a general communication provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Marlborough or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine – together with their own professional advisers if appropriate – if any investment mentioned herein is believed to be suitable. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice.
All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Issued by Marlborough Investment Management Limited, authorised and regulated by the Financial Conduct Authority (reference number 115231). Registered office: PO BOX 1852 Lichfield, Staffordshire, England, WS13 8XU. Registered in England No. 01947598. The Clever Marlborough Model Portfolio Service (‘Clever MPS’) is a collaboration between Marlborough Investment Management Limited as the Discretionary Fund Manager and Clever Adviser Technology Limited, a company registered in England and Wales (company number 2910523) with registered office at Watergate House, 85 Watergate Street, Chester, Cheshire CH1 2LF (“Clever”). Clever is a technology and software provision company which developed a methodology and proprietary suite of algorithms for the monitoring, analysis, collation, and transmission of data on the performance of Investment Funds and related portfolios within the UK market which Marlborough utilises for investment purposes.