Emma Sheldon

Written by Richard Warne.

Economic fine-tuning is difficult. Markets continue to hope that central bankers will weave a path in terms of controlling inflation, while not having to aggressively increase interest rates, thereby potentially leading to a steady glide path for economies. Of late, there have been many commentators shouting about hard landings and heightened recessionary fears. So far this year, these fears have dominated markets and returns for both equities and bonds have been challenging.

The prevailing question now seems to be “are we there yet”? Have we reached the other side of the market reset? As we sit today sentiment seems very negative, but have these recessionary fears been baked into markets? The Fed in the US has made it abundantly clear that curtailing inflation is their number one goal, but it appears that markets have moved on to absorb expectations for several further rate hikes. This is probably best highlighted by the fact that the yield on the 10-year US treasuries has settled below 3% for some time.

Eurozone inflation came into focus last week, with the Consumer Price Index (CPI) prints being higher than was forecast. Germany’s year-on-year inflation was the highest with a 7.9% increase. The focus here is not on quantitative tightening, as Christine Lagarde, President of the ECB, has already provided colour on this, but whether the first-rate hike will be 50bps. Futures markets are certainly starting to price in this possibility.

Looking ahead, much of this may become a sort of “waiting game” until we see the next meaningful event. The next CPI print in the US is only a week away, with the June Federal Open Market Committee (FOMC) only a few days later. Potentially, a general lapse in headlines might allow for markets to settle into a more subdued pattern. For a data-dependent Fed that everyone has their eyes on, these economic data prints are more important than ever.

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 6^th June 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

After quite a challenging year to date for both equity and fixed income assets, last week saw a strong risk rally. The S&P 500 Index of US Equities led the charge and rallied +5.3% in GBP terms. Global, Continental European and UK Equities also had a good week, while the riskiest forms of fixed income such as high yield bonds also rallied. High-quality global bonds, as measured by the Bloomberg Global Aggregate Index GBP Hedged, also rallied slightly last week.

This is interesting as it illustrates the continuations of a phenomenon that we have witnessed this year as the performance of equities and high-quality treasury bonds have started to move in the same direction as inflation, and higher interest rates prove to be a challenging environment for both. The MSCI All Country World Index of global equities is now down -6.4% for the year in GBP terms while the Bloomberg Global Aggregate Index GBP Hedged is also down -7.3% for the year. Naïve allocations to treasuries and equities have formed the basis of traditional multi-asset investment over the last three decades, and a reversal of the negative correlation between the two variables could have interesting ramifications.

Many of our portfolio components such as specialist global value equities, Chinese government bonds and Absolute Return strategies have generated positive absolute returns this year as equity and fixed income markets fell. Once again this illustrates the importance of a diversified portfolio which goes beyond traditional stocks & bonds, particularly in the changing macroeconomic landscape we currently face.

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 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

April proved to be another challenging month for investors as the MSCI All Country World Index retreated -3.5% in GBP terms, which admittedly was better than the -6.5% return in local currency terms thanks to the weakening in Sterling. There was a wide spread of outcomes for global investors across different markets. Much of the pain was concentrated in the tech-focused NASDAQ Index of US Equities which lost -13.3% in local currency terms over the month. The UK Equity market, measured by the FTSE All Share Index, was something of a safe haven in this environment, returning +0.3% for the month.  Alongside falls in the equity markets, traditional Fixed Income markets offered little by way of protection as the Bloomberg Global Aggregate Index of investment grade bonds fell -2.8% in GBP Hedged terms, while the High Yield Corporate Index was down -3.3%.

These market ructions are likely symptomatic of the ongoing transition we have witnessed this year from the market exuberance and easy financial conditions which characterised the post-pandemic environment, to an environment with higher interest rates, higher inflation rates and more realistic equity valuations. One of the most notable developments this year has been the continued deflation of speculative equity valuations which reached levels reminiscent of the dot.com boom of the early 2000’s, while the bust has been eerily similar too. Cathie Wood’s much hyped Ark Innovation ETF is now in a -70% drawdown from its pandemic peak. Names that might be more familiar to UK investors, such as the Baillie Gifford suite of products, have experienced similar outcomes.

However, much like in the opening lines of T.S Eliot’s poem from which our title is sourced (ironically written at the twilight of the last great pandemic of 1918), April is also the month in which hope springs eternal. Value equity performance has been robust in recent months, active Fixed Income management has been hugely important and high-tech growth equities are now priced at more reasonable levels. Diligent and open-minded research will likely assist long-term investors to plant the seeds for future returns.

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 May 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Shane Balkham.

The Federal Open Market Committee (FOMC) will meet at the beginning of May, and we are already seeing the rhetoric in order to manage market expectations.  From the minutes and forecasts from the March meeting, we know that there is the prospect of six further rate rises this year.

Setting the scene for these rate hikes, we had a speech from James Bullard, President of the St. Louis branch of the Federal Reserve, and most importantly a voting member of the FOMC.  On the back of March’s inflation reading in the US of 8.5%, he is calling for an increase in the speed of executing the hikes and is likely to vote for a larger hike than the previous 0.25% move.  It is expected that several members will call for a rise of 50-75bps next month.  For Bullard, there is a critical importance of the Fed maintaining its creditability in combating inflation, as monetary policy decisions walk a difficult and fine line in taming inflation without causing a recession.

The Bank of England also faces the same navigation problem, as inflation in the UK rose to 7% for March adding pressure for interest rates to rise.  In the minutes from March’s Monetary Policy Committee meeting, the Bank of England expects inflation to peak at around 8% in Q2, recognising the large shock to the economy from the war on Ukraine.  The Bank of England also meets at the beginning of May, and we might have a fourth consecutive meeting where interest rates are hiked.

Before the central banks have their next meetings, we have France deciding on their next President.  On Sunday, French voters will choose between the incumbent President Emmanuel Macron, or the far-right rival of Marine Le Pen.  It is expected to be an extremely tight election race, with both contenders looking to secure the voters from the ten eliminated candidates from the first round.  Will Le Pen’s manifesto of protectionism and localism see France turning to the right?

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 19^th April 2022.

© 2022 YOU Asset Management.  All rights reserved.

Written by Richard Warne.

Equity and bond markets were generally in negative territory last week, with most bond indices declining around -1.0% and the global equity market, MSCI All Country World Index retracted -0.7% in Sterling terms. The shining light for the week was the performance of UK equities with the FTSE All Share Index +1.5%, a positive for us with an overweight to the UK equity market. The return of the UK market is indicative of the variation we have seen this year between value and growth, with the UK market being “old economy”, a beneficiary of the shift in expectations of rising rates and inflation, with its high exposure to mining, energy, and financials.

The shift in market sentiment emphasised the old economy and new economy deviation. While the UK market enjoyed a positive week, the Nasdaq 100 in the US, which has a significant allocation to technology, declined -2.8% in Sterling terms. The first quarter earnings season will soon be upon us, which may provide a guide to where markets are going. It will be important in helping to answer the question everyone wants to know – “are the global economy and markets strong enough to endure a monetary tightening cycle”?

The environment continues to remain confusing. Many of the macro-overhangs continue to weigh on markets, while the war in Ukraine sadly drags on with little visibility of a resolution. China is balancing how it contains recent COVID-19 outbreaks without damaging an already sluggish economy, while in the US the Fed is signalling an accelerated timeline for quantitative easing. In France, the resurgence of the far right could signal further political uncertainty in Europe. All good reasons why, as investors, it is important to stick to your investment journey and not be swayed by the uncertainty.

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 11^th April 2022.

© 2022 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

Last Friday marked the end of an extraordinary first quarter, which likely left most policymakers feeling like April fools. Policies centred around everything, ranging from dependence on Russian hydrocarbons to past assertions of the transitory nature of inflation, and began to unwind before our eyes.  Vladimir Lenin famously said, “There are decades where nothing happens; and there are weeks where decades happen”,  and this quote certainly applies to the first quarter of 2022.

Markets rallied last week as risk appetite appeared to return.  The MSCI All Country World Index returned +1.2% in GBP terms.  Overall, the first quarter was negative for both Equity and Fixed Income returns with the confluence of the economic impact from the war in Europe, causing higher interest rates as central banks battle stubborn inflation and further COVID restrictions in China causing a broad-based sell off. The MSCI All Country World Index of global equities was down -2.1% for the quarter, however outcomes ranged from -7.3% for Continental European Equities to +0.8% for UK Equities, while the S&P 500 in the US was down -1.4% despite heavy tech selling at the beginning of the quarter.

It was one of the worst quarters on record for Fixed Income, as the Bloomberg Global Aggregate GBP Hedged was down -5.2% in the face of rising interest rates, while Investment Grade Credit was down -7.1%.  Similar to the equity markets, there was a wide dispersion of outcomes below the surface. Chinese Government debt was up +0.3% for the quarter while Short Dated Inflation Linked Bonds were down only -0.3%. Periods like this illustrate once again the necessity for diligent and diversified positioning to achieve the best outcomes for clients.

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 4^th April 2022.

© 2022 YOU Asset Management. All rights reserved.