Economic and Political Monthly Roundup
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A collation of recent insights on markets and economies taken from the comments made by chairs and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.
Roundup
Investors have been debating for weeks whether the economy is in a recession or heading toward one, but what seems certain is that things are bad, and they are going to get worse. UK consumers are particularly under pressure as energy prices climb to extreme levels and the pound slides. Europe put an end to negative interest rates in August. Economists are forecasting greater inflationary pressures, perhaps requiring even higher interest rates. The Federal Reserve chair reiterated that the central bank is committed to curbing inflation and will continue to raise rates even in a recessionary environment, which sparked a sell-off in stocks and rising bond yields towards the end of the month.
August’s highlights
Global
Witan’s chair says it will take time for higher rates to bring supply and demand into balance, with an increased risk of recession.
The manager of Smithson thinks fears of recession are a natural extension of increasing interest rate expectations and these concerns have intensified as the year has gone on.
Global Opportunities Trust’s manager reflects on the first six months of the year, saying they have given a flavour of the unfolding bear market.
Murray International’s chair believes the world is in flux, with more unanswered questions shaping the future than for many a year.
UK
Temple Bar’s managers say even though the UK equity market is holding up better than most overseas markets so far this year, UK equities continue to be valued at a significant discount to global equities generally.
Neil Hermon of Henderson Smaller Companies attributes the sector’s underperformance to a general flight to the safety, defensiveness and liquidity of large-cap stocks.
Diverse Income’s chair praises the UK’s sector mix and low valuations for supporting the country’s economy and allowing it to hold up better than most others.
The managers of JPMorgan Claverhouse say that the market will eventually return to focus on company fundamentals, which should suit a bottom-up stock picking approach.
North America
JPMorgan American’s managers warn that persistently high inflation is undermining real wage growth, consumer spending power and corporate profits.
The management team at JPMorgan US Smaller Companies expect rising recession fears to continue to pose a challenging backdrop for US small cap stocks in the near term.
Pershing Square’s manager sees opportunity in volatile markets.
Private equity
Pantheon International’s chair highlights that valuations of businesses in public markets have already come under pressure.
The chair of CT Private Equity notes that the recovery from the pandemic has created new challenges with shifts in consumer behaviour, supply chain constraints and labour shortages foremost amongst these.
Other
We also have comments on global emerging markets from Fundsmith Emerging Equities and Mobius; Asia Pacific from abrdn Asian Income and Invesco Asia; Europe from European Assets and Fidelity European; Japan from Fidelity Japan; flexible investment from RIT Capital Partners; commodities and natural resources from BlackRock World Mining, Riverstone Energy and BlackRock Energy and Resources Income; technology & media from Allianz Technology; debt from Axiom European Financial Debt, Invesco Bond Income Plus and RM Infrastructure Income; renewable energy infrastructure from The Renewables Infrastructure Group; environmental from Impax Environmental and property from Derwent London, Tritax Big Box REIT, CLS Holdings, Empiric Student Property, Capital & Regional, Capital & Counties and Impact Healthcare REIT.
Full version
Click on the link at the bottom of the page to access the full report.
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