Emma

Written by Shane Balkham.

The last full week of January was relatively quiet for markets.  With the arrival of the Year of the Rabbit, many Asian markets were closed for the Chinese Lunar New Year celebrations.  In the US, the Federal Reserve was in a blackout period ahead of the rate setting meeting next week.  In fact, this week is considerably more interesting with the Federal Reserve, Bank of England, and European Central Bank all having their first policy meetings of 2023.  Expectations are for a slowing in the pace of rate hikes, with a potential pause at some point this year.  More on that next week.

There were some interesting data releases though, with company earnings and guidance reporting lower, managing expectations for a below-trend growth environment in 2023 and preparing for a recession.  However, fourth quarter growth for the US beat expectations, with GDP growing at an annual 2.9%, but underneath this figure we saw signs of weakness as consumer spending was subdued.

On a brighter note, US core PCE (Personal Consumption Expenditure) inflation data was published on Friday.  Although it showed a slight uptick from November (moving from 0.2% to 0.3%), the annualised figure came in at 4.4%, significantly lower than the peak of 5.4%.  This is still above the Federal Reverse’s target, but definitely moving in the right direction and arguably faster than expected.  This could be sufficient evidence for policy makers to tone down the pace of rate hikes in this week’s meeting.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30^th January 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Ilaria Massei.

Last Friday, we saw a positive UK GDP reading with the UK economy growing by 0.1% as services activity strengthened. Moreover, the Office for National Statistics data published last Friday showed that a recent fall in gas prices helped household finances and boosted savings. This data is certainly encouraging as it could suggest that the UK has avoided a recession (defined as two consecutive quarters of negative GDP growth). However, this might also suggest that the Bank of England will be forced to raise interest rates again, given that the positive GDP could lead to inflationary pressure. On a separate note, Rishi Sunak and his government rejected the request coming from businesses to reopen immigration.  This is to especially help the hospitality sector, which is suffering from labour shortages, and is arguably holding back the UK economy from growing. The Prime Minister will re-address this and his plan will be one of the main points of the Budget in March.

In Japan, the Yen and the long-term Japanese government bond yields surged, raising uncertainties over the Bank of Japan’s policy board meeting this week. The Bank of Japan reviewed its long end yield curve policy measures by widening its 10y JGB yield target to +/- 0.5% (previously +/- 0.25%) in December. This measure was supposed to restore order in the Japanese bond market, distorted by the central bank’s ultra-loosing policy. However, the measure increased volatility, suggesting that the Bank of Japan might need to provide forward guidance to the market.

Elsewhere, Emerging Market stocks have seen a great rebound with the MSCI Emerging Market Index up +2.9% last week in local currency terms. This is the result of two forces both influencing the balance of trade in Emerging Markets, in a positive way. On one hand, we have seen signals of easing inflationary pressures globally that might suggest that the Federal Reserve will slow its interest rate rises. Conversely, China since lifting its Zero-COVID policy restrictions, is suggesting a recovery in the economy this year. An increase in activity in China will likely lead to a rally in Emerging Markets as Emerging Market countries are beneficiaries of higher demand for commodities and other services that serve the chinese population.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 16^th January 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

We saw some promising news on the inflation front as the Eurozone’s consumer prices rose by 9.2% year-on-year in December 2022 which was down from 10.1% in November. The reading was well below preliminary estimates of 9.7% and was the lowest point for four months. This was attributed mainly to a short-term decline in energy prices which still remain elevated. However, the core inflation print (which excludes energy, food, alcohol, and tobacco prices) increased slightly to 5.2% in December from 5.0% in November on a year-on-year basis which remains above the European Central Bank’s target of 2%. This could be a sign that inflation has started to peak in the region, European markets reacted well to signs of inflation slowing with the MSCI Europe ex-UK Index closing +4.1% last week.

In the US, the Institute for Supply Management (ISM) Services PMI print came in at 49.6 for December which was lower than initial forecasts of 55.0 and which compared to 56.5 for November. This was the first contraction in the services sector data since the height of the COVID-19 pandemic in May 2020.  The report combines monthly question responses from over 370 purchasing and supply executives in the US. A reading below 50 generally indicates that the economy is contracting.

Finally, we saw further evidence of weakness in the UK Housing market as house prices fell -1.5% on a month-on-month basis in December which brought the annual house price increase to 2.0% on a year-on-year basis. Households are currently grappling with significantly higher mortgage rates following a series of interest rate hikes by the Bank of England. Households are having to contend with a higher variable rate or lock in a higher fixed rate as they re-finance their mortgage, both scenarios result in higher monthly payments, which many have not been accustomed to.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of  9^th January 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

The last month of 2022 witnessed weak returns across asset classes, book-ending what has been one of the most challenging years for investors in decades. The MSCI All Country World Index was down -4.9% for the month of December in GBP terms, while the Bloomberg Global Aggregate Index of high quality global bonds was also down -1.3% in GBP Hedged terms.

There were a number of contributing factors to the weak market performance in the final weeks of 2022. US jobs data on the 15^th and 22^nd of December came in stronger than anticipated, which were followed by stronger consumer confidence data released on the 21^st. The market likely interpreted this as a green light for the Federal Reserve to continue the policy of monetary tightening to combat inflation which has terrified markets all year.

The month also saw a continued underperformance of growth equities vs their value counterparts, with the MSCI All Country World Growth Index down -6.5% vs -3.3% for the value-biased equivalent index (both in GBP terms). Many of the growth names which fared so well in 2020 and 2021 continued to come back down to earth.

As we begin a new year, things are looking arguably rosier for investors. Inflation is continuing to fall in the US at a faster rate than anticipated. It is also likely close to peaking in the UK and Europe (baring any further escalation in geopolitical tensions etc). Asset prices across the board are at some of the most attractive levels they have been at in years, with even high quality government bonds offering decent yields. While the last year has been painful, it presents opportunities and the ability for long-term investors to lock in future gains.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of  3^rd January 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Last week, we saw the release of further economic data which included US Producer Price Inflation (PPI) which surprised to the upside, coming in at 7.4% on a year-on-year basis with expectations at 7.2%. The US market did not react well to this data release and, as markets had estimated, there was a much faster slowdown in inflation. This saw the S&P 500 Index close down -4.0% in GBP terms last week. Markets are now looking towards the next Federal Open Market Committee meeting which is set to take place on Tuesday and Wednesday of this week, where we will learn the Fed’s decision on how aggressively it will increase rates in the US. Since June 2022, the Federal Reserve has forcefully hiked up rates in an attempt to slow down inflation which has seen rates climb to 4.0%. The expectation is that the Fed will begin curbing these hikes with a 50 basis point increase expected on Wednesday.

In the UK, house prices have fallen for the third month in a row which is also the fastest pace at which they have fallen since the housing crash of 2008. This has been caused by buyers being put off by higher monthly mortgage payments which have surged following a string of interest rate rises by the Bank of England. Halifax announced that average house prices declined by -2.3% between October and November which is the highest monthly price drop for 14 years. The Bank of England is set to announce its interest rate decision on Thursday and expectations are that we are likely to see a 50 basis point increase to move interest rates to 3.5%.

We will be taking a break from penning The World In A Week and will return on 3^rd January 2023. We wish you all a Merry Christmas and a Happy New Year.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 12^th December 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Chris Ayton.

Global equity markets were up in local currency terms last week; however, Sterling’s continued recovery left the GBP return for the MSCI All Country World Index up just +0.4%. In fixed income, the Barclays Global Aggregate Index was up +0.9% in GBP Hedged terms.

The S&P 500 Index was up +1.2% for the week in local currency terms but just +0.1% in Sterling terms.  The US Dollar fell back sharply over the week as data suggested that both core inflation for consumers and cost pressures for the manufacturing sector were easing. A speech from Fed Chairman, Jay Powell, also raised hopes that the Federal Reserve would slow its pace of future rate rises.  Similarly in the UK, the FTSE All Share Index rose +0.7% as data from the Bank of England suggested that inflationary pressures may be easing here too, potentially giving the Bank of England’s Monetary Policy Committee some room to be less aggressive on rate rises going forward.

Euro Area producer price inflation slowed more than expected, influenced by weakening foreign demand for German exports and strained supply chains.  EU member states agreed to implement a $60 ceiling on global purchases of Russian oil in a deal designed to dent Russia’s oil revenues. The cap is set to also be adopted by G7 countries, allowing countries such as China and India to continue to buy Russian oil but at a lower price.  That said, China and India have not yet confirmed they will implement the cap.

Emerging Market equities enjoyed another good week with MSCI EM up +2.5% in GBP terms. China was the key driver of this, with MSCI China up 7.6% on the week despite ongoing protests surrounding China’s Zero-COVID policy.

In Asia, India continued to perform well as investors are attracted to India’s strong GDP growth (predicted at 6.5%-7% for FY23) and they were further buoyed by a Reserve Bank of India bulletin signalling that inflation was slowing. Japan was the laggard as MSCI Japan fell back -3.0% in local currency terms although the losses for GBP investors were dampened by the continued rebound in the Yen which is being driven by hopes that the Federal Reserve in the US will start to slow its rates increases as well as the Bank of Japan’s efforts to prop up the currency.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 5^th December 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Shane Balkham.

American families congregated together to celebrate the harvest and give blessings for the year that is passing.  Thanksgiving and its subsequent commercialisation being Black Friday, will be an interesting reflection point for 2022.  What, if anything, will the American consumer be grateful for?  With the cost-of-living crisis continuing to squeeze Middle America and as central banks blindly continue to hike rates, was there any salvation for retailers over the weekend?

Mastercard has forecast that Black Friday will see the American consumer spend 15% more on the equivalent day in 2021.  This projection itself seems inflated, however, the forecast represents the strategy that retailers are offering short-term promotions in order to clear inventories that have built up in a slowing economy.  Interestingly, it is expected that Black Friday online sales will surpass $9 billion for the first time, according to Adobe Digital Insights.  After two years of pandemic-related anxieties, shoppers are expected to return to physical stores this year.

The minutes from the Federal Open Market Committee (FOMC) were published last week and described a desire to slowdown the pace of rate hikes but fell short of signalling an actual pause.  These minutes were taken over three weeks ago, and since then we have had several members of the FOMC give speeches that reinforce the growing expectation that the Federal Reserve realise that policy may have gone beyond what is needed.

With the next FOMC meeting a little over two weeks away, there is insufficient time for the data on which the decisions are heavily reliant to show what the market already suspects; that inflation is slowly being tamed and central banks have seemingly delivered adequate rate hikes.  This leaves the FOMC with a difficult decision on 14^th December, as there is an inherent lag between monetary policy actions and the behaviour in economic activity and inflation.  Based on Chairman Jerome Powell’s previous comments on maintaining a firm stance on combating inflation at all costs, it is likely that we will see a fifth successive 0.75% rate hike.  Whereas the decision in the September meeting was unanimous amongst the members of the FOMC, it is likely that this next vote will be split.

Across to the opposite side of the world, China reported the first COVID-19 fatalities for over six months.  There is widespread expectation that China will ease restrictions, however this is only likely once China has approved  its own mRNA vaccine (similar to the Pfizer-BioNTech and Moderna vaccines) and roll out programme.  Until then, a continuation of lockdowns and restrictions will remain in place.   However, a zero-tolerance towards COVID-19 policy can only work if the population believes that the frequent lockdowns will actually work.  It would appear that many do not have that faith with protests held in Shanghai and Beijing over the weekend.

It is unusual to see the Chinese people challenging the authorities, with banners protesting against President Xi Jinping and his policies, reminiscent of the Tiananmen Square protests  in 1989.  Although the protestors represented a relatively small portion of the population, it does show the need for China to tackle the virus quickly, especially against a slowing and faltering economy.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 28^th November 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

Global equity markets were broadly flat in local currency terms last week, however there was a significant weakening in the US Dollar vs Sterling and other currencies which left the GBP return for the MSCI All Country World Index down -1.6%.

The weakening dollar was driven by hopes that slowing economic data might prompt the Federal Reserve in the US to slow, pause, or even reverse its path of monetary tightening to combat inflation. This caused a rally in Emerging Market equities and Fixed Income which have come under significant pressure from the incredible strength of the US Dollar over recent years.

This rally was particularly pronounced in China, as the MSCI China Equity Index is up +20.0% for the month of November to date in GBP terms. This rally has been spurred by the unveiling of support for over-indebted property developers by the authorities in Beijing, as well as tentative rumours of a potential relaxing of the economically disruptive COVID-Zero policy. Whether these measures prove substantial and lasting remains to be seen, but they provided enough hope for markets to rally significantly, having taken a significant beating and reaching more attractive valuations.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 21^st November 2022.

© 2022 YOU Asset Management. All rights reserved.