There has been little change in the global markets since our last update in June. August and September did see equity markets fall overall but this is a usual occurrence – when looking at performance data over a number of years, short term adjustments in markets happen frequently over these two months due to the fact many traders and fund managers are on holiday. Market activity and trading volumes are always low during the summer months. These short term fluctuations are part and parcel of longer-term investing.
Inflation in the West is still higher than central banks would like; although it feels like most developed markets have passed ‘peak inflation’ now. The previous hopes of interest rates starting to reduce by the end of the year have now been re-adjusted to rates remaining frozen until 2024.
The US Federal Bank and the Bank of England both took a pause in raising interest rates in September but have been mindful in their commentary that this may not be the end of the tightening cycle if data suggests more needs to be done.
In contrast, the European Central Bank raised main interest rates by 0.25% but did indicate this could be the last increase they will impose. Christine Langarde, the President of the ECB, stated that the ECB considers that rates “have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target”. She has repeatedly suggested that although the rates may have reached their peak, they would stay elevated for an extended period of time.
In summary, although the current economic climate still isn’t a friendly environment for broad asset classes, marking a break from a four-decade period of steady growth and inflation, fund houses still see opportunities in income (for example Corporate Bond exposure), emerging markets and undervalued geographical regions such as Japan. This is why Fairey Associates use asset allocation as a core principle for our investment methodology and ensure your portfolios are diversified across a wide range of asset classes, regions, and market caps.
Risk Warnings:
Inflation in the West is still higher than central banks would like; although it feels like most developed markets have passed ‘peak inflation’ now. The previous hopes of interest rates starting to reduce by the end of the year have now been re-adjusted to rates remaining frozen until 2024.
The US Federal Bank and the Bank of England both took a pause in raising interest rates in September but have been mindful in their commentary that this may not be the end of the tightening cycle if data suggests more needs to be done.
In contrast, the European Central Bank raised main interest rates by 0.25% but did indicate this could be the last increase they will impose. Christine Langarde, the President of the ECB, stated that the ECB considers that rates “have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target”. She has repeatedly suggested that although the rates may have reached their peak, they would stay elevated for an extended period of time.
In summary, although the current economic climate still isn’t a friendly environment for broad asset classes, marking a break from a four-decade period of steady growth and inflation, fund houses still see opportunities in income (for example Corporate Bond exposure), emerging markets and undervalued geographical regions such as Japan. This is why Fairey Associates use asset allocation as a core principle for our investment methodology and ensure your portfolios are diversified across a wide range of asset classes, regions, and market caps.
Risk Warnings:
- The value of an investment and the income from it could go down as well as up.
- All investing is subject to risk, including the possible loss of the money you invest.
- Past performance is not a reliable indicator of future results.
- Diversification does not ensure a profit or protect against a loss.
- Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
- This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 2nd October 2023. You are recommended to seek competent professional advice before taking any action.
