Equity Markets
Following on from the turmoil within the US banking sector, the stress continued in Q2 as JP Morgan acquired First Republic Bank in May to avoid yet another bank collapse. Despite these concerns, the S&P500 is +5.63% over the quarter which has largely been driven by a narrow band of technology stocks as evidenced by the impressive +12.22% performance of the ‘tech-heavy’ NASDAQ index over the same period.
Mostly due to a change in corporate attitudes, the Bank of Japan’s prudent management of inflation, and the lack of investor confidence in Chinese holdings, the Japanese stock market has seen $44b of net flows from foreign investor cash surging towards its front doors since the beginning of April. The result of which has seen the Nikkei 225 increase by +5.99% over the quarter, and reach highs last seen in 1990 in Yen terms.
Bond Markets
With the continued concerns surrounding the banking sector, bond markets remained volatile. Yields on developed markets’ government bonds, most notably in the UK and US, carried on rising as central banks advance their efforts to combat inflation. Whilst yields on government bonds may be increasing, bond prices move inversely to interest rates and as such prices fell sharply during the quarter. The Bloomberg US Government index fell -4.06%, whilst the Bloomberg Global Aggregate UK Government index fell even further by -6.20%.
Macroeconomic Environment
Developed markets have proven resilient against ‘sticky’ inflation, tight labour markets and central banks’ interest rate rises. The demands for greater wages from the labour market have mellowed but remain stubborn, especially in service industries. This has contributed to the continued and larger than expected interest rate rises. The Bank of England surprised some members of the public by raising interest rates in June by 0.50% to 5.00%.
US Congress’ decision to suspend the debt ceiling (was $31.4tn) until 2025 to avoid defaulting on their debts makes for the 79th time since its introduction in 1960.
Outlook
Moving forward, whilst we anticipate continued volatility, equities should make progress as interest rates begin to peak causing inflation to commence its decline in the second half of the year and into 2024.
Please note, our Market Overview & Outlook is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch, telephone 01392 875500, info@SeabrookClark.co.uk.
Market Overview & Outlook Quarter 2 2023 (1 April – 30 June 2023) – Developed Market Equities Prosper
Matthew Clark
Equity Markets
Following on from the turmoil within the US banking sector, the stress continued in Q2 as JP Morgan acquired First Republic Bank in May to avoid yet another bank collapse. Despite these concerns, the S&P500 is +5.63% over the quarter which has largely been driven by a narrow band of technology stocks as evidenced by the impressive +12.22% performance of the ‘tech-heavy’ NASDAQ index over the same period.
Mostly due to a change in corporate attitudes, the Bank of Japan’s prudent management of inflation, and the lack of investor confidence in Chinese holdings, the Japanese stock market has seen $44b of net flows from foreign investor cash surging towards its front doors since the beginning of April. The result of which has seen the Nikkei 225 increase by +5.99% over the quarter, and reach highs last seen in 1990 in Yen terms.
Bond Markets
With the continued concerns surrounding the banking sector, bond markets remained volatile. Yields on developed markets’ government bonds, most notably in the UK and US, carried on rising as central banks advance their efforts to combat inflation. Whilst yields on government bonds may be increasing, bond prices move inversely to interest rates and as such prices fell sharply during the quarter. The Bloomberg US Government index fell -4.06%, whilst the Bloomberg Global Aggregate UK Government index fell even further by -6.20%.
Macroeconomic Environment
Developed markets have proven resilient against ‘sticky’ inflation, tight labour markets and central banks’ interest rate rises. The demands for greater wages from the labour market have mellowed but remain stubborn, especially in service industries. This has contributed to the continued and larger than expected interest rate rises. The Bank of England surprised some members of the public by raising interest rates in June by 0.50% to 5.00%.
US Congress’ decision to suspend the debt ceiling (was $31.4tn) until 2025 to avoid defaulting on their debts makes for the 79th time since its introduction in 1960.
Outlook
Moving forward, whilst we anticipate continued volatility, equities should make progress as interest rates begin to peak causing inflation to commence its decline in the second half of the year and into 2024.
Please note, our Market Overview & Outlook is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch, telephone 01392 875500, info@SeabrookClark.co.uk.
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