Investment Line is a regular investment bulletin produced by Mattioli Woods plc. The communication provides an update on funds, highlights some of the areas we are focusing on, and shares our thoughts on the issues of the day.
The rally seen in July and August looks to be shaky in its foundations – we do not feel it appropriate to add risk yet.
Better than expected earnings and hopes of a Federal Reserve ‘pivot’ have boosted global equities but little has been resolved. China’s economy looks weak and combined with a slowdown in the US and elsewhere, the engines of global growth are spluttering.
The UK faces a severely challenged backdrop, regardless of who becomes the next Prime Minister, with a cost-of-living crisis and industrial action reminding many investors of the environment of the 1970s. If the worst fears over the state of the UK economy materialise, then consumer focused businesses could face a very tough time. For now, larger multinational companies remain something of a safe(r) bet.
Areas like infrastructure and healthcare appear to be defensive compared to other sectors and although we do have riskier thematic ideas our portfolios retain a decent balance.
Yields are much more attractive than they have been for some time, especially in shorter-dated bonds. Of course, the inflation threat continues to stalk the sector but if the main focus of investors swings to recession, then areas such as sovereign debt may rally. Hard to get overly enthusiastic about the space though.
Another area where diversification and nuance are important. Economic slowdown will hit most areas of commercial property but many of our holdings are less economically sensitive than most and should hold up better while also protecting against inflation.
Those vehicles which meet our requirements are likely to be able to make a contribution in markets beset with uncertainty and increased volatility, but in truth there are not that many which are suitable. The performance of the convertible bond arbitrage fund which we hold in portfolios has been reasonable though not spectacular!
We retain sensible levels of cash given the outlook and will deploy once the right opportunities come along, at the right price.
Investment Line is written and edited by members of the Mattioli Woods Group investment committee and is for information purposes. It is not intended to be an invitation to buy, or act upon the comments made, and all/any investment decisions should be taken with advice, given appropriate knowledge of the investor’s circumstances. The value of investments and the income from them can go down as well as up, and you may not get back the amount invested. Past performance is not a guide to future returns.
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