December 2023
- As the two wars continue the main financial conversation has turned to when interest rates will be cut, the market says soon, the Central Bankers say no way.
- Interest rates remain on hold in the US and the UK but rates are predicted to be cut next year, the consensus being by at least by 1% by the end of 2024.
- China is among the world’s biggest commodity importers and after a slow post pandemic is starting to show some expansion so miners have moved sharply upwards recently. Real Estate has moved sharply too.
- As reported by the Economist, the major financial institutions cannot agree on growth or the rate of that growth. Bank of America is pencilling in stagflation, Morgan Stanley foresees a soft landing, Goldman Sachs thinks the US economy will expand by 2.1% twice as much as UBS thinks.
- The yield curve (a forecasting tool that predicts future interest rates) is predicting “higher rates for longer” and has been for some time but it seems the market has started to reject this idea.
- The investment community it seems has started to buy US debt again and there is more certainty the humungous issuance of US debt coming to market next year will be met with wiling buyers not the case a few weeks ago.
- Europe and the UK are still predicted to have a harder landing (deeper recession) than the US.
- Our portfolios are holding up well because:
- We have been using money market funds which invest in short term instruments and provide good yields.
- Investing in underlying assets directly i.e., government gilts and high-quality corporate bonds.
- We are starting to insert structured products into our portfolios because
by doing so will introduce a certainty ingredient.- We have been investing client capital in high quality companies with deep pockets.
- We have continued to invest in tech.
- Property funds are coming under pressure but mostly open-ended varieties, we tend to use close ended funds.
- We have moved out of Agricultural and Infrastructure funds due to underperformance.
- Our portfolios use fixed interest and fixed interest investments suffer when interest rates are high and there is more supply – this affects their value negatively. It should be remembered however with fixed interest you get your money back at maturity not the case with other investments so it’s a matter of holding these investments until interest rates start to come down or the investment matures.
Please note that:
- This information in isolation is not financial advice.
- Past Performance of investments is not to be relied on and the value and the income from investments can go up as well as down.
- It is advisable to regularly review your investments.
