Markets in general had a good final three months of 2022. It would be inaccurate to say that much of the economic data released over the quarter was good in an absolute sense, but it is true that a lot of it was considerably better than expected.
Having been on an unenviable trajectory, both inflation and economic growth were reported better than feared, with lower inflation and higher growth recorded. This was true both in the UK and other major economies. The actual numbers recorded, particularly in the case of inflation, remain poor however, as can be seen in the continued hawkishness from central banks around the world. In the UK, the Bank of England raised the policy rate to 3.5% in December after starting the quarter at just 2.25%.
Markets are forward-looking, so despite the 1.25% rise in interest rates through the quarter, UK Government bond markets ended little-changed across the period. However, there continues to be heightened volatility. For example, 4¼% gilt maturing in 2032 (i.e. the ten-year gilt) saw a 14% swing in its price in around six weeks from mid-October to the end of November. For the index-linked variant the volatility was even more pronounced, with a swing over the same period of more than 20%.
As with prior quarters, equity markets were calmer with little sign of stress in broad indices. One can find pockets of high volatility in mega caps like Amazon and Tesla, but these are the exception in an otherwise steady equity market.
There are numerous countervailing factors affecting markets, many of which have very unpredictable outcomes. These include elevated western inflation rates; ongoing and evolving conflict in Eastern Europe; China’s attitude and reactions to said conflict, coupled with its nascent post-COVID reopening; volatile energy prices driven by supply chain disruption; and emergent order regarding the geopolitical alignment of commodity producers. These factors are unpredictable and the range of outcomes wide.
It is a cliché to say that markets are unpredictable, but this year in particular the diversity of potential outcomes is immense. A wide diversity of outcomes demands a diversity of investments – whatever 2023 holds, the year doesn’t feel like one in which trying to be too clever will pay off.
Fundamentals update
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 final quarter of 2022, there was one addition and one removal from the site:
| Funds removed | Funds added |
| Baillie Gifford High Yield Bond | Invesco High Yield UK |
Meeting notes
One of the advantages of the Fundamentals service is the regular updates from the meetings the Investments 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, 38 funds have been reviewed and had their 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 | |
| abrdn Global Smaller Companies | Liontrust Sustainable Future Global Growth |
| Artemis Corporate Bond | Liontrust Sustainable Future UK Growth |
| Baillie Gifford Global Alpha Growth | M&G Emerging Markets Bond |
| Blackrock Continental European Income | MAN GLG Income Professional |
| Blackrock Gold and General | MAN GLG Undervalued Assets |
| Blackrock UK Special Situations | Montanaro UK Income |
| Fidelity Asia | Polar Capital Global Insurance |
| Fidelity Emerging Markets | Polar Capital Global Technology |
| Fidelity Global Special Situations | Royal London Corporate Bond |
| First Sentier Global Listed Infrastructure | Royal London Sustainable Leaders |
| Invesco Asian | Schroder European |
| Janus Henderson Absolute Return | Schroder Global Equity Income |
| JOHCM UK Dynamic | Schroder Global Recovery |
| JPM Emerging Markets Income | Stewart Investors Worldwide Sustainability |
| JPM US Equity Income | TB Amati UK Smaller Companies |
| Jupiter Japan Income | TB Evenlode Income |
| Jupiter Special Situations | Trojan Global Income |
| Lazard Emerging Markets | Trojan Income |
| LF Tellworth UK Smaller Companies | TwentyFour Corporate Bond |
AJ Bell reports
Each fund or ETF on Fundamentals 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 and 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.
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