Q1 Market Digest 2023

The start of the year brought a whirlwind start to market performances. The highlights include:

• Global equities outperforming UK equities
• UK CPI inflation unexpectedly rose
• All the main asset classes generated positive returns

In this market digest, our Investment Manager, Jack Richards, explains all the peaks and troughs experienced in the last quarter.

• The start of the year brought positivity to markets, with emerging evidence that inflation had peaked in many
  major economies, bringing greater expectations that central banks would begin to slow down their interest rate hiking programmes. The end of the quarter saw focus turn to the banking sector. Fragility spread first from the US, with the collapse of Silicon Valley Bank, and then to Europe as Credit Suisse was bought out by its Swiss rival, UBS. The takeover restored some calm to the financial sector and meant central banks continued to raise interest rates in March, albeit only by 0.25% in the case of the Federal Reserve and the Bank of England.
• Our model portfolios are typically invested in a combination of the asset classes shown in the chart. Despite the stresses seen in the banking sector, global equities generated a positive performance over the period. UK equities had a poor March, owing to the large exposure to banks, and therefore underperformed the global market.
• Bonds rose over the month and quarter, as expectations that we were reaching the peak in interest rates pushed down bond yields (bond prices rise as yields fall). High Yield Bonds benefitted from credit spreads falling i.e. the difference between yields on High Yield and government bonds fell.
• At a portfolio level over Q1, all asset classes contributed to positive performance. The riskier assets, such as
  equities, performed well in January as investor confidence grew. The bonds in the portfolio performed better in March when investors favoured the safety of government debt during the period of banking stress.

Download the full market digest