Emma Sheldon

Written by Cormac Nevin.

Markets were rather muted in Europe and the US last week, with the FTSE All Share Index of UK Equities up +0.3%, the MSCI Europe Ex-UK Index of Continental European Equities up by the same amount, and the S&P 500 Index of US Equities up +0.9%, all in GBP terms. However, greater action was found in markets in the Far East, as the MSCI China Index of stocks listed in both mainland China and Hong Kong rallied +6.6% over the week.

The Chinese equity market has been in the doldrums since peaking in early 2021. Since then, a combination of government regulatory crackdowns, a broadly botched COVID response, and increased trading restrictions stemming from geopolitics have taken their toll and the index is now at levels witnessed in 2017. Chinese equities are now arguably at attractive valuations having been among the weakest global equity markets for the first half of 2023, although risks remain.

The Chinese economy failed to roar back to the degree that many market participants expected following its re-opening in January 2023 after the abandonment of their zero- COVID policy. The market staged a strong rally last week, following Monday’s meeting of the politburo of the Chinese Communist Party, whereby President Xi Jinping announced support for “countercyclical” measures from government as a form of stimulus to support the flagging economy. While property related stocks soared on this announcement, policymakers have a fine line to tread between supporting the economy and discouraging the sort of speculative frenzy that has gripped the nation’s property market recently.

Japan was also a source of interesting newsflow towards the end of last week as Kazuo Ueda, the relatively new Governor of Japan’s central bank, announced a policy tweak which would loosen the Bank of Japan’s control over the country’s bond market. This sent Japanese 10-year government bond yields sharply higher, although they are still far below yields in other markets.

Our team are following the policy developments in Asia with great interest and as a potential source of future returns within a globally diversified portfolio.

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 31^st July 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Chris Ayton.

As a classic but relatively wet Wimbledon fortnight ended, with nearly 200,000 servings of strawberries having been eaten, global equity markets were in no mood to be dampened with the MSCI All Country World Index up +1.1% in Sterling terms.  Asian equity markets led the charge with MSCI AC Asia Pacific ex-Japan Index up +3.7% for the week, closely followed by Continental Europe with MSCI Europe ex-UK up +3.6% for the week.  Japan was the laggard, as MSCI Japan fell by -0.3% over the week in Sterling terms.

The UK FTSE All Share Index was up a healthy +2.6% over the same period, despite news that UK GDP had contracted 0.1% in May. This data was marginally better than expected and came alongside other data showing that UK wages grew faster than expected in the three months to May.  The inflationary impact of these wage hikes fuelled further fears of more interest rate rises in the UK and helped push Sterling up to more than $1.31 against the US Dollar. It’s hard to believe this exchange rate was just $1.07 in September of last year.

Conversely, in the US we saw further signs that inflation there is coming under control.  The annual inflation rate in the US fell to 3% in June, which was below expectations and the slowest increase since March 2021.  This has sparked some speculation that the Federal Reserve could soon be done with its interest rate tightening cycle, although policy makers are saying they are open to further action.

The technology dominated Nasdaq Index in the US crept up another +1.2% over the week, taking its rise to an astonishing +31.1% for this year so far in Sterling terms (and +42.9% in US Dollar terms!).  As discussed here previously, this rise has been driven by the six largest index constituents, namely Apple, Microsoft, Amazon, Alphabet, Tesla and NVIDIA.  So dominant has their collective size become that Nasdaq announced last week that it would be undertaking a “special rebalance” to redistribute some of their index weightings to smaller constituents, cutting their combined weighting from over 50% of the Nasdaq Index to just 40%.  Clearly, this will have implications for the hundreds of billions of Dollars that are invested in ETFs and index funds that track the Nasdaq Index, but it remains to be seen if this will have any impact on the relative performance of the Big Six going forward.

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 17^th July 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Last Wednesday, we saw the Federal Reserve’s meeting minutes released which provided further insight into policymakers’ decision making and outlook. In June, Federal Reserve officials paused the interest rate rising cycle to subsequently reassess the impact of their hikes on the economy. This followed ten straight interest rate hikes which have raised rates to 5.25% over the course of the last 15 months. The minutes stated that further monetary tightening is likely but at a slower pace going forward with all but two of the eighteen officials foreseeing rates to be higher by the end of the year. Global equity markets reacted negatively to the Federal Reserve’s indication that it will likely have to continue to raise rates with the MSCI All Country World Index returning -2.2% last week in GBP terms.

We also saw US employment data released last week which showed that an additional 209,000 jobs were added in June 2023, missing expectations for the first time in 15 months, indicating a modest slowdown in US employment and that hiring could be beginning to slow. Consensus forecasts were expecting 240,000 jobs to be added in June with the actual figure considerably lower than that and also significantly below May’s revised figure of 306,000 jobs. However, the unemployment rate remained at 3.6%, in line with expectations. US payroll data is an important factor for policymakers and is one of many economic indicators the Federal Reserve consider as part of their decision-making process.

The Bank of England’s Monetary Policy Committee is not set to meet again until early August, however markets are now forecasting UK interest rates to climb towards 6.5% by early 2024. We saw the average 5-year fixed rate mortgage eclipse 6% and there are expectations this could climb higher if inflation continues to remain elevated. The next UK inflation data release isn’t due until the 19^th July and will provide the Bank of England’s Monetary Policy Committee with another data point to make their decision.

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 10^th July 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Ilaria Massei.

Last week saw a heavy economic calendar in the US, with the release of many economic indicators contributing to a boost in market sentiment. Inflation data showed a fall in the year-over-year increase in the Personal Consumption Expenditures Price Index (PCE), calming concerns about rising prices. Weekly jobless claims dropped significantly and continuing claims also surprised on the downside and fell back to a four-month low. Consumer sentiment also improved, attributed to the resolution of the debt ceiling standoff and positive feelings regarding softening inflation. Durable goods orders and new home sales both exceeded expectations, indicating strength in business investment and the housing market.

In the Eurozone, annual inflation continued to slow in June from 6.1% in May to 5.5%, marking the third consecutive month of deceleration. Reports from the European Central Bank’s annual Forum on Central banking suggested the likelihood of another interest rate increase in July, acknowledging that the battle against high inflation is proceeding.

On the same note, the Bank of England Governor Andrew Bailey said that the UK interest rates are likely to stay higher for longer than financial markets expect.

Elsewhere, China’s economic data are only showing a partial recovery, with domestic travel increased by 89.1% compared to the previous year but remaining 22.8% below pre-pandemic levels in 2019. Industrial profits are also not encouraging , with a decline of 18.8% year-over-year in the first five months of 2023.

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 July 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

The Monetary Policy Committee of the Bank of England (BoE) met last week at Threadneedle Street and decided to raise the Bank Rate by 0.5%, from 4.5% to 5.0%. This was most likely in response to an unchanged UK inflation rate of 8.7% which was published the day before, as well as strong employment and wage data released the prior week which the BoE likely interpreted as the signs of an economy which is running hot. While we have seen sustained falls in inflation in Europe and the US (which we suspect could continue and indeed accelerate) we think inflation could remain relatively higher in the UK due to the unique challenges faced by the economy. These include a labour shortage as well as a multi-decade inability to build sufficient housing or energy infrastructure. These forces will likely see inflation in the UK remain higher than it ought to be, while few of these problems will be solved by higher interest rates. The BoE is threading a precarious needle between its use of interest rates to attempt to cool inflation (compounded by sustained political pressure for them to do something) and inflicting significant damage on the disposable incomes of the portion of the population with variable rate mortgages. While more people own their homes outright than in the 1980s, the size of the outstanding mortgages are far larger for today’s generation of young homeowners.

Elsewhere in the world, we saw evidence that economies are really starting to weaken in Continental Europe and the US. The Purchasing Managers’ Index (PMI) came in significantly lower than expected which suggests to us that higher interest rates in those economies is raising the probability of a recession. Geopolitical risks also remained elevated, as the weekend saw an attempted coup against Vladimir Putin’s Russian regime by a band of Russia’s mercenaries employed on the Ukrainian frontline.

While markets were broadly down over the course of last week, many components of markets appear to be disregarding the growing list of potential challenges. This leaves us comfortable with our preference for substantial diversification in the face of a wide range of potential outcomes.

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 26^th June 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Chris Ayton.

Global equity markets trod water last week, with the MSCI All Country World Index ending the week down -0.2% in Sterling terms.  MSCI Europe ex-UK fell -1.1%, with the FTSE All Share Index and the S&P 500 Index both dropping -0.4% but MSCI Emerging Markets was up +1.1% boosted by positive returns in China and Brazil.  After years of neglect and disinterest, corporate governance improvements are leading international investors to revisit their allocations to Japanese equities and this helped MSCI Japan rise +1.5% for the week.  However, the Japanese Yen remained weak ahead of the Bank of Japan meeting this week where, unlike all other major economies, it is expected to maintain its ultra-loose monetary policy. The Federal Reserve and the European Central Bank (ECB) also meet this week.

Last week the Organisation for Economic Co-Operation and Development (OECD) released its latest GDP growth forecasts for 2023 and 2024, predicting the global economy would expand by 2.7% in 2023 and 2.9% in 2024.  Underlying that, it went on to predict the US will avoid recession, India will grow strongly (6% this year, 7% next year), and China will achieve its target of 5% GDP growth this year and next.  However, it estimated the UK will only achieve 0.3% growth this year and 1% next year, although this is better than previous estimates.  While this backdrop is certainly interesting, it is important to remember that economic growth does not equate to stock market returns.

In Europe, the EU’s statistics agency revised down the EU’s GDP growth to -0.1% for both the final quarter of 2022 and first quarter of 2023, meaning the Eurozone is technically already in a recession. This surprising news came on the back of Germany also announcing that it had fallen into recession. This data has brought into question the European Commission’s 1.1% growth forecast for 2023 and it will be interesting to see if the ECB starts to face any pressure to ease up on further interest rate rises at their upcoming meeting.

Data released by Halifax last week showed UK house prices registering their first annual decline since 2012, with average house prices in May sitting 1% below where they were this time last year. The Nationwide Building Society had earlier indicated an even greater annual decline.  With Uswitch reporting the average 5-year fixed rate mortgage rate in the UK has now hit 5.59% and further interest rate rises expected going forward, this is clearly starting to impact price expectations for buyers and sellers.

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 June 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Previously, there were four other US stocks with a market cap greater than $1 trillion which included Alphabet (Google), Microsoft, Amazon.com, and Apple. NVIDIA has now joined this exclusive club following its immense rally year-to-date. NVIDIA was founded by Jensen Huang in 1993 and it has taken thirty  years for it to eclipse the $1 trillion market cap. Its capabilities stemmed from being a dominant player in the video game chips segment which benefitted greatly from the pandemic as demand for gaming increased substantially. However, the Company pivoted into the AI chips market with NVIDIA producing one of the core crucial components which is the graphics processing unit (GPU). With AI’s potential being understood, adopted in practice, and realised, the demand for this type of technology has skyrocketed as companies are devoting significant resource towards increasing their longer-term efficiencies within their business. The stock has returned +175% year-to-date and its valuation has become significantly more expensive but those now willing to pay more than 50x next year’s predicted earnings presumably expect their competitive position to remain unchallenged for years to come.

Last Friday, we saw further signs of a strong labour market in the US with 339,000 jobs added in May which vastly exceeded expectations of 190,000. However, we did see the US unemployment rate increase to 3.7% from 3.5% which was also above forecasts of 3.5%. The next Federal Open Market Committee meeting is in mid-June where the Committee will have received May’s inflation reading by then to make their interest rate decision.

Elsewhere, in Europe we saw eurozone inflation slow to 6.1% in May from 7.0% in April which was below forecasts of 6.3%. Christine Lagarde, President of the European Central Bank (ECB) stated that inflation is still far too high and that it is set to remain elevated for much longer. The ECB is also set to meet next week and will make its interest rate decision.

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 June 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Ilaria Massei.

Last Friday, we saw US stocks hit a nine-month high thanks to encouraging talks on debt ceiling and tech sector gains. The NASDAQ 100 rose 4.5% last week in GBP terms, boosted by the rally experienced by AI related stocks. There have only been a handful of stocks in the mega-cap market range that have led this rally in tech stocks. These include the likes of Alphabet, Amazon, Meta, Microsoft and NVIDIA. Last Thursday, shares of the chipmaker NVIDIA jumped 24%, making the company the sixth most highly valued public company in the world. Shares rose after the company beat consensus first-quarter earnings expectations by a wide margin and raised its profit outlook.

This extraordinary performance resurfaced the topic of narrow leadership in the US stock market, whereby fewer and fewer US tech stocks contribute to the broad index level return. Another crucial topic last week was the debt ceiling talks where policymakers delivered some encouraging news, signalling that they were working on a deal to raise the debt ceiling before the June deadline to avoid an unprecedented default. Meanwhile, the core (less food and energy) personal consumption expenditures (PCE) price index, rose by 0.4% in April, a tick above expectations.

Elsewhere, data released last Thursday signalled that the German economy fell into a recession in the first quarter, due to persistent high price increases and a surge in borrowing costs. GDP shrank 0.3% in the three months through March, a downward revision from an early estimate of zero growth. However, European Central Bank (ECB) policymakers’ view is that interest rates would need to rise further and stay high to curb inflation in the medium term, potentially deteriorating the economy further.

The MSCI Japan declined to -1.1% last week in GBP terms but encouraging data released last week saw Japanese manufacturing activity expanding for the first time in seven months in May. The services sector also reported robust growth, as the reopening of the country to tourism led to a record rise in business activity.

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 May 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

Markets rallied last week as data releases such as strong housing statistics in the US allayed fears of an economic hard landing driven by the interest rate increases we have witnessed over the last year. The MSCI All Country World Index of global equities (MSCI ACWI) rallied +1.5% in GBP terms.

A market which the team has noticed getting an increasing degree of exposure from global investors recently has been the Japanese Equity market. In local terms, Japanese Equities are up +8.5% over the course of the second quarter to date, which has strongly outperformed MSCI ACWI over the same period (+1.9%). The GBP return has been reduced by a weakening in the Yen vs Sterling, therefore returning +3.6%, but it remains strongly ahead of other markets. We have been overweight to the Japanese Equity market since 2020, and find it interesting that many of the characteristics of the market which we find appealing are now being given more attention from other investors and the media. These include attractive valuations compared to, for example, the US Equity market, corporate governance reforms being driven by the Tokyo Stock Exchange and other forces including low inflation, accelerating GDP and wage data. While the Yen has proved a headwind for GBP-based investors for the year to date, we think it provides excellent diversification benefits and room for the Japanese currency to rally should the global economy deteriorate as many predict which would lead to a potential narrowing in US/Japanese interest rate differential.

Another interesting element has been the increased investment in the Japanese market from Warren Buffett. While we think investors should never slavishly follow any one investment luminary, we do think it is interesting that the Sage of Omaha now owns more stocks in Japan than in any other country besides the US via his Berkshire Hathaway holding company. Given Mr Buffett’s exceedingly long track record in finding high quality companies trading at discounted valuations, we believe that the Japanese Equity market could potentially be an excellent return driver into the future while other developed markets are more challenged from high valuations or macroeconomic turbulence.

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 22^nd May 2023

© 2023 YOU Asset Management. All rights reserved.