Emma Sheldon

Written by Shane Balkham.

Every month starts with a surge of surveys to provide an update on the health of global economies.  The current wave would suggest that global manufacturing is picking up slightly, which is good news, but that in itself would imply higher price pressures, which is bad news, especially with central banks’ decision meetings fast approaching next week.

It is no surprise that central bankers were busy last week reinforcing the view that fighting inflation remains the single most important task ahead of them.  Managing inflation expectations, and with it rate hike expectations, has become a core skillset for members of the world’s central banks.  They are haunted by inflationary mistakes made in the 1970s when monetary policy was eased too quickly.

With policymakers making all the noise, it was a much quieter week for politics, however in the UK we did see a breakthrough in the long drawn out talks between the UK and EU over the Northern Ireland Protocol.  This was part of the Brexit withdrawal agreement, which was agreed in 2019 and rushed through Parliament to meet the legal deadline date of Brexit.

The difficulty was in designing a set of rules to avoid a hard border between Northern Ireland and the Republic of Ireland.  The original Protocol ended up leaving Northern Ireland with access to the EU Single Market and effectively created a border between Northern Ireland and the rest of the UK.  This resulted in a raft of inefficient red tape and some products were unable to be sent across to Northern Ireland from the mainland as negotiations continued.

Prime Minister Rishi Sunak met with the European Commissioner President Ursula von der Leyen last week and agreed to reforms under the ‘Windsor Framework’ which will allow goods travelling between the mainland and Northern Ireland that are not bound for the EU.  These will pass through a green lane, largely avoiding custom checks.  Although a minor issue to some, it has been a significant stumbling block for Northern Irish political stability.

The friendlier tone between Sunak and von der Leyen could present a more constructive relationship going forward between the UK and the EU.  With Northern Ireland now being able to legally buy mainland sausages, this may mark the start of putting Brexit in the archives and allowing UK equities to be seen in a more positive light by global investors.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 6^th March 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Chris Ayton.

After a strong start to the year, equity markets took a pause for breath last week with the MSCI AC World Index down -2.1% in Sterling terms and the FTSE All Share Index down -1.4%.  The picture was similar globally as MSCI Europe ex-UK was down -2.4%, S&P 500 Index down -2.2%, MSCI Japan down -1.4% and MSCI Emerging Markets down -2.3% on the week. Fixed income securities held up a little better but the Barclays Global Aggregate Index GBP Hedged was still down -0.2%.

Investors responded negatively to the release of the minutes from the latest Federal Reserve meeting which showed a clear consensus across the Committee members to raise interest rates last month and to keep fighting inflation with further hikes as required.  The minutes also noted that some members voted for higher increases than the 0.25% rise that was finally agreed.  Economic data released post this meeting has done little to suggest the previous rate rises are beginning to bite sufficiently in order to bring US inflation or the US economy under control.  This backdrop held back equity markets globally.

Away from equity and fixed income markets, we noted with interest that the price of the EU’s Carbon Allowances (EUAs) climbed above €100 a tonne for the first time, representing a 20% rise since the start of the year.  This is the price that European companies within designated polluting industries, such as gas, coal power generation and industrial manufacturing, have to pay to buy credits to allow them to create the carbon emissions that are a by-product of their businesses. One allowance allows the purchaser to emit 1 tonne of carbon dioxide or equivalent. The higher these prices are, the higher their operating costs become and the greater the financial incentive for them to invest in more environmentally friendly solutions.  More and more industries are being brought into this regime by the EU, forcing companies to buy EUAs on the open market if they want to operate legally. In addition, the supply of these credits is designed to structurally fall over time which forces polluters to compete for an ever-reducing amount of credits, or switch to cleaner solutions.  Moving through the threshold price of €100 a tonne may turn out to be a watershed moment on the long-term path to achieving the EU’s ambitious environmental goals.  Our Multi-Asset Blend Funds have held a small exposure to these EUAs since June 2022 and  are therefore benefitting from the price rise as well as the indirect positive environmental impact of taking these credits out of the market.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 27^th February 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Millan Chauhan.

Last week we saw several economic data releases, which included the US Consumer Price Index (CPI) print rising by 6.4% in January 2023 on a year-on-year basis which was slightly above consensus expectations of 6.2%. The main drivers of inflation remain transportation services (namely airfares) and food. Within food prices, the cost of eggs has increased 70% on a year-on-year basis in January which is the most of any grocery item. This is due to the avian-influenza outbreak which has caused a contraction in the supply of chickens.

US Inflation has clearly cooled down as it peaked at 9.1% in June 2022. With the inflation print coming in slightly higher than expected, it could mean that the Federal Reserve continue to hike going further into 2023 as they attempt to curtail pricing pressures. As a reminder, the Federal Reserve has raised interest rates from 0.50% to 4.75% over the last twelve months.

In the UK, CPI rose by 10.1% in January 2023 on a year-on-year basis which was down from 10.5% in December 2022. The print was lower than expected and was further evidence that inflation may have peaked as the print was a five-month low. UK inflation remains much higher than in the Eurozone and the US but has been helped by lower energy price growth.

There are clearly strong signs of slowing inflation and there will be another inflation report due before the next Bank of England Monetary Policy Committee meeting on the 23^rd March, when it will make an interest rate decision. Similarly, the Federal Open Market Committee in the US is set to meet on the 21^st March where there will be another US Inflation report released mid-March for the Committee to consider going into that meeting.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 20^th February 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Ilaria Massei.

Almost all the major equity benchmarks ended lower in a week which delivered relatively few important economic data releases. The S&P 500 closed at -0.9% in GBP terms, in a week where the Fed Chairman, Jerome Powell, held a speech at the Economic Club of Washington and communicated to markets that the disinflationary process has begun. However, according to the latest jobs report, economic conditions have not deteriorated enough to justify a reversal in the hawkish monetary policy currently applied.

In the UK, the GDP Growth rate was released last Friday and signalled that the economy stalled in the last quarter of 2022, and narrowly escaped a recession despite a sharp economic contraction of 0.5% in December.  A recession is defined as GDP contracting for two consecutive quarters. Although growth for the quarter was 0%, the contraction in December was mostly due to a drop in services output and strikes affecting the country during the Christmas period.

In China, the annual inflation rate rose to 2.1%, from 1.8% in December. This was the highest reading in three months, as easing of lockdowns have increased prices. On a monthly basis, consumer prices increased 0.8% in January, following a flat reading in December 2022 and marking the steepest rise since January 2021.

Japan was the only major equity market to end the week on a positive note, with the MSCI Japan Index closing up +0.8% in GBP terms. It has been a week full of speculation around the new potential nominees to be the next governor of the Bank of Japan (BoJ). Investors are looking for a shift in monetary policy, which could be delivered by Kazuo Ueda who seems to be more cautious about the risks of an ultra-loose monetary policy.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13^th February 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Cormac Nevin.

Last week markets continued on their positive trajectory for the year , spurred on by a flurry of central bank interest rate decisions and press conferences from the Bank of England, US Federal Reserve  and the European Central Bank (ECB). Growth equities led the way last week, with the MSCI All Country World Growth Index up +4.2% in GBP terms. The more value-orientated FTSE All Share Index of UK stocks was up +1.9%, while Emerging Markets (as measured by the MSCI EM Index) were one of the weakest performers but still up +0.9%. Fixed Income markets also had a strong week, with the Bloomberg Global High Yield Corporate Index up +1.0% and even the safest government bonds (measured by the Bloomberg Global Treasury Index) rallying +0.4% (both in GBP Hedged terms).

As mentioned, this price action in markets was largely viewed as the result of the market’s continued game of chicken with global central banks. All central banks raised their policy interest rates in their ongoing fight against inflation, however market participants appeared to be of the view that each policymaker was approaching the end of their rate hiking cycle and responded with a touch of exuberance to the prospect of the end of rate increases (or indeed the commencement of rate cuts). The Bank of England increased rates from 3.5% to 4.0%, the US Federal Reserve moved from 4.5% to 4.75% and the ECB moved from 2.5% to 3.0%.

If you are struck by the paradox of central banks tightening policy (via raising interest rates) but markets responding with looser monetary conditions (via increased equity prices, tighter credit spreads etc.), then you are not alone! We think it is an illustrative reminder of the forward-looking nature of markets as they look through the proximate actions of policymakers and to where “terminal rates” might settle.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 6^th February 2023.

© 2023 YOU Asset Management. All rights reserved.

Written by Shane Balkham.

The last full week of January was relatively quiet for markets.  With the arrival of the Year of the Rabbit, many Asian markets were closed for the Chinese Lunar New Year celebrations.  In the US, the Federal Reserve was in a blackout period ahead of the rate setting meeting next week.  In fact, this week is considerably more interesting with the Federal Reserve, Bank of England, and European Central Bank all having their first policy meetings of 2023.  Expectations are for a slowing in the pace of rate hikes, with a potential pause at some point this year.  More on that next week.

There were some interesting data releases though, with company earnings and guidance reporting lower, managing expectations for a below-trend growth environment in 2023 and preparing for a recession.  However, fourth quarter growth for the US beat expectations, with GDP growing at an annual 2.9%, but underneath this figure we saw signs of weakness as consumer spending was subdued.

On a brighter note, US core PCE (Personal Consumption Expenditure) inflation data was published on Friday.  Although it showed a slight uptick from November (moving from 0.2% to 0.3%), the annualised figure came in at 4.4%, significantly lower than the peak of 5.4%.  This is still above the Federal Reverse’s target, but definitely moving in the right direction and arguably faster than expected.  This could be sufficient evidence for policy makers to tone down the pace of rate hikes in this week’s meeting.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30^th January 2023.

© 2023 YOU Asset Management. All rights reserved.