The debate over whether the global economy is in good shape or bad shape, and whether inflation and interest rates have peaked or not, has dominated market behaviour over the past three months. Overall, equities and bonds have rallied when the view is that inflation and interest rates have peaked and been sold off when the opposite has been believed.
While this has made for a volatile backdrop, it has been encouraging to see that, on balance, the global economy is outperforming expectations. The strong views of late 2022 that a recession was inevitable have subsided, with even the pessimists at the Bank of England now not quite so miserable about the UK economy. However, events during the quarter have shown that problems remain, and the global economy continues to be fragile.
The significant increase in interest rates across developed markets during 2022 and into 2023 was always going to result in some pain across financial assets. The performance of bond markets over the past 12 months has been proof of that, but during the quarter the wider impact has become apparent, with the failure of several banks. Three failures in the US, albeit two related to crypto assets, and the high-profile collapse of Switzerland’s second largest bank, Credit Suisse, have reminded everyone that the challenge of getting inflation under control via rapid increases in interest rates is not without its problems.
Since the financial crisis in 2008, significant work has been done by regulators and governments across developed markets to improve the structure of the financial system with much improved risk management, stress testing and capital reserves. However, banking is inherently highly geared, and mishaps can and do occur in often unpredictable places. In the UK, the past 15 years have seen significant improvements in the banking sector with the consequence that during this quarter sterling has been seen as a ‘safer’ currency, with less risk of a major banking problem. This has seen GBP rally 7% against the USD over the quarter, creating a headwind for those assets denominated in USD.
Markets are forward-looking in their behaviours, with current news priced into assets. While it’s easy to get fixated on the here and now, what is happening in the next 12-18 months is where investors are focused. Given that outlook remains uncertain, it is unsurprising that asset prices remain volatile. Until there is confidence that inflation is under control, interest rates have peaked, and the financial system is stable, it would be unwise to expect anything less.
Fundamentals update
This update is designed to keep you up to date with what’s been happening on the Fundamentals to help support you with your investment research.
As a reminder, the Fundamentals website is designed to help you with your investment research and keep you up to date with the latest views from the AJ Bell Investments team covering the funds and ETFs that the team think have the potential to achieve their stated objectives.
Changes in Fundamentals
Over the first quarter of 2023, there have been a couple of additions and removals from the list;
| Funds removed | Funds added |
| CT UK Equity Income | Liontrust UK Growth |
| FTF Martin Currie Mid Cap | Blackrock UK Income |
Meeting notes
One of the advantages of the Fundamentals service is the regular updates from the meetings the Investment team have with the underlying fund managers. These will be updated at least once a year and many have been added over the last few months.
Over the quarter, 26 funds have been reviewed and had the commentary updated. Take a look at the AJ Bell reports on the website to see the latest thoughts of the fund managers and our assessment too.
| Funds updated in the past quarter | |
| Allianz Strategic Bond | JOHCM UK Dynamic |
| Artemis Strategic Bond | Jupiter Asian Income |
| Artemis US Select | Jupiter Japan Income |
| Artemis US Smaller Companies | Lightman European |
| Baring Europe Select | Liontrust Sustainable Future Global Growth |
| BlackRock European Dynamic | Liontrust UK Growth |
| BlackRock UK Special Situations | Man GLG Undervalued Assets |
| CT Responsible Coporate Bond | Polar Capital Global Technology |
| Evenlode Global Income | Polar Capital Global Insurance |
| Fidelity Asia | Schroder European |
| Fidelity Emerging Markets | Trojan Global Income |
| FTF Martin Currie UK Smaller Companies | Trojan Income |
| Janus Henderson Absolute Return | Twenty Four Corporate Bond |
AJ Bell Reports
Each fund or ETF on the Fundamental service has an AJ Bell report that is updated quarterly. This report contains key information on the fund or ETF such as the latest positioning, performance & risk data and key information such as charges and ESG data. All of these reports have been updated to help you with your research due diligence.
Other news
We are constantly researching the investment universe to ensure that the Fundamentals list contains a wide range of high quality managers. Keep checking back on our website to see our latest ideas and updates.
We love to get your feedback on the Fundamentals service so if you have any thoughts you’d like to share with us, please let us know.please let us know.
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