Market Update. by Michael Zacharia, Investment Analyst
Second Quarter 2023
The second quarter of 2023 was witness to some recovery in global equity prices whilst bond prices remained under pressure due to persistent inflation and further interest rate rises across the developed markets. Key conversation pieces included the macro backdrop, how inflation has remained sticky and whether developed market economies will fall into recession.
The US equity market was one of the best performing markets during the first half, with a 17% (in USD) return, but that return was primarily driven by 7 technology related companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla). These equities were up over 60% whilst the remainder of the market was only up 5%.
This divergence will not continue but it will continue to be important to try and exploit opportunities, and across the globe. We are also in the position that many of our asset classes are offering a better long term potential outlook versus cash.
What is our current positioning and outlook for the remainder of 2023?
Our UK equity exposure remains underweight due to inflation concerns and because we prefer investment exposure in economies that are nearing the end of their tightening cycle.
That said, it remains important to maintain portfolio diversification across a broad array of sectors and asset classes. Within our defensive assets, we see greater opportunities within corporate bonds versus government bonds although prices will remain volatile until market participants believe we are nearing the end of interest rate hikes.
Whilst we are slowly coming through this difficult period, we believe this a great time for our active investment style. We believe that we are well positioned to take advantage of opportunities on a global scale.
We remain optimistic for the long term and continue to believe it is important to stay invested.
If you want to speak with one of our expert wealth managers about your investment contact the team here