A correction driven by banking, not by fundamentals
Following a strong four-month rally from October 2022 lows, markets have experienced a correction. The trigger has been turmoil in the US banking sector, where the collapse of Silicon Valley Bank and two regional banks exposed the consequences of poor risk management in the face of sharply rising interest rates. The authorities have moved swiftly to address the situation, restoring calm for now, and the decline in equities has been shallow overall.
Bonds rally as equities absorb a shallow blow
The collapse of SVB and two regional US banks has sent shockwaves through the financial sector, with all three institutions falling victim to poor risk management in the face of the sharp rise in interest rates. The authorities have moved swiftly to address the situation, restoring calm for the time being.
Bond markets have rallied sharply, with yields declining on expectations of easier monetary policy to protect the banking sector. The decline in equities, however, has been shallow overall, concentrated mostly in financials rather than spreading across the broader market.
First quartile again through a volatile year
Our standard portfolios have continued to navigate market turbulence well, once again falling by considerably less than the benchmarks and remaining firmly in the first quartile over what has been a challenging and volatile year. They remain in positive territory for the year to date. Performance has been helped by holdings in physical gold and gold mining shares, which have rallied strongly, along with a healthy balance in cash.
Over the long term, our approach of building robust, diversified portfolios has successfully navigated many different market events, along with fund-specific issues such as Woodford, where gains in some portfolio investments have insulated against losses elsewhere. The fact that our portfolios have been able to absorb these setbacks and continue to perform well relative to benchmark is testament to our rigorous, robust and diversified approach.
Our portfolios have absorbed these setbacks and continue to perform well relative to benchmark
A note from the desk
I am pleased to share our monthly update on market events. The overview seeks to summarise market movements together with our views and the rationale for the positioning of investments going forward. As always, should any aspect of this commentary prompt a question, we would welcome the conversation.
Martyn Charlwood · Managing Director
Important information
This article is a marketing communication intended for general information only. It does not constitute personal advice, a recommendation, or an offer to buy or sell any investment. If you are unsure whether an investment is suitable for your circumstances, please seek personal advice.
Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise. Capital values are at risk and not guaranteed. Forecasts and views expressed in this commentary represent our assessment at the time of writing and are subject to change.
To discuss how this commentary applies to your own portfolio, we would welcome a conversation.
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