Following on from last quarter, markets continue to show signs of stress. The ongoing conflict between Russia and Ukraine is undoubtedly a key factor that has led to the current situation, however new cracks are forming through additional factors like energy security, declining fiscal situations and stubbornly high inflation. It can be tempting to believe in simple cause and effect – cause: Russian invasion of Ukraine; effect: inflation, spiralling debt and shortages. However, it would be accurate to say that much of the blame for these difficulties existed for a long time before the invasion, and the conflict merely uncovered the unpleasant underbelly.
As we ended the third quarter, equity markets were close to the lowest levels seen all year. Notably though, the FTSE 100 was just 9% off for the year, demonstrating that, despite the general unease in markets, equity markets are expecting little long-term damage from the current environment. Taking equity markets in isolation paints a somewhat sanguine picture, but delving into other markets highlights the stress much more. This is perhaps starkest in fixed income markets, where the re-emergence of previously dormant central bank hawkishness has seen widespread losses in bond portfolios. The 10-year gilt, a commonly used reference for general bond market sentiment, has fallen in excess of 20% this year in line with one of the sharpest increases in yield in history.
Many in capital markets could be accused of being parochial in their outlook, but as international investors it is important that we look beyond the UK when assessing the state of markets. It is true to say that UK public finances are poor, it is also true to say that inflation rates are spiking to uncomfortable levels. It is not true to say, however, that the UK is in a uniquely tricky spot. Whilst the UK’s financial position isn’t in any way enviable, it should be considered in the context of similar economies. Much of the world is grappling with the twin challenges of inflation and deficits, with the US being seen as the best of a bad lot. Thus, headlines around weakening sterling and multi-decade highs fail to tell the whole story. Sterling is weak, but really only against the dollar, and whilst inflation is uncomfortable, this is equally the case in most other places.
Fundamentals update
This update aims to keep you keep abreast of what’s been happening on the Fundamentals website.
As a reminder, Fundamentals is designed to help you with your investment research, and keep you up to date on the AJ Bell Investments Team’s latest views about which funds and ETFs have the best chance of achieving their stated objectives.
Changes in Fundamentals
Over the course of the third quarter of 2022, there were no changes to the Fundamentals list.
Meeting notes
A key feature of Fundamentals is the regular reports it provides from the Investments Team’s meetings with 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, 23 funds have been reviewed and had their commentaries 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 | Franklin Templeton UK Smaller Companies |
| Artemis Strategic Bond | Jupiter Asian Income |
| Artemis US Select | Jupiter Japan Income |
| Artemis US Smaller Companies | Lazard Emerging Markets |
| Baillie Gifford Global Alpha | Lightman European |
| Baillie Gifford Japanese | Montanaro UK Income |
| Baring Europe Select | Polar Capital Global Insurance |
| Blackrock UK Special Situations | Polar Capital Global Technology |
| CT UK Equity Income | Stewart Investors Asia Pacific Leaders Sustainability |
| Evenlode Global Income | Stewart Investors Worldwide Sustainability |
| Fidelity Strategic Bond | TwentyFour Corporate Bond |
| Franklin Templeton UK Mid Cap |
AJ Bell reports
Each fund or ETF on the Fundamentals 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 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 constantly research 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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