Financial Markets Commentary

October 2023

• The factors affecting the world economy and investment performance
  • 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 just caught on to this and this is starting to worry investors
    • The dollar continues to strengthen against most other currencies
    • Yields on US Treasuries continue to climb it seems no one wants to buy US treasuries, but everyone wants to sell them. This may have something to do with UD debt being out of control and is reminiscent of the UK gilt market when Liz Truss and her chancellor introduced their budget
      • Notwithstanding the above inflation and interest rates may be at their peak
    • Whilst a soft landing (mild recession) is being predicted in the US and Europe a harder landing (deeper recession) is predicted for the UK
    • UK property prices continue to slide
  • 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
    • The rising yields on longer term debt means investments in these areas have suffered, we have avoided this
    • We have been investing client capital in high quality companies with deep pockets
    • We have continued to invest in tech
    • We have avoided investments which have governance problems and over exposed to very small companies which are suffering as the market becomes more choosy
  • 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.

Gianni Campopiano
Managing Director & Chartered Financial Planner