Annualised performance data in euros at 30th June 2023

There is no doubt that global stock markets are enjoying this period of strong economic growth, robust consumer spending and falling inflation. The rally this year has confounded those of a bearish bias and also those, including us, with a more constructive view on the market. We expected a rising but volatile equity market in 2023 but have been surprised to see double digit gains for the S&P 500 at the end of June. We will take it. The broader NYSE Primary Exchange Index comprising over 3,000 publicly listed companies has gained a more modest +4% year-to-date. European equities have added +10%, UK equities +3% while emerging markets have gained +2%.



Japan has been one of the standout performers in 2023 and has already rallied +11% year-to-date in euro terms. Japan is belatedly undergoing major corporate governance reform and has introduced shareholder friendly initiatives, which are driving the boom in Japanese equities. An increasing number of corporates are returning capital to shareholders for the first time in decades. Berkshire Hathaway has recently invested in Japan to take advantage of this recent trend. The country is also experiencing a pickup in inflation and a weaker currency, which together are driving consumer demand at home and Japanese exports abroad. Japanese equities have traded at a discount to their global peer group for a long time, so we believe this trending move higher could last for quite a while yet.


Should we continue to expect higher equity prices for the remainder of the year? Despite the risks highlighted at the start of this report, we remain comfortable in the view that positive returns are achievable for the remainder of the year. Whilst the traditional caveat of increased volatility, is never too far from our lips, the collective positioning of aggressive assets, within Funds has been shown to be too negative the underweight in Equities remains in place today but has started to unwind.

Companies certainly have challenges today and costs are rising across the board. However, it is difficult for us to warn of a looming recession when unemployment rates remain at record lows. Tighter monetary conditions are a concern and we are on watch for signs of a slowdown and pick up in stock market volatility. We are watching the financial sector closely. A strong economy needs a strong financial sector. US regional banks have struggled this year due to a large exposure to commercial property on their books coupled with having to deal with the recent surge in interest rates. We do not want to see the regional banking sector breaking to new lows.


We have noted in past reports that outside the United States, many regional markets have traded sideways for a long time. European equities for example, have made very limited progress in over twenty years. The path forward will remain volatile but the direction for equities should be gradually higher over time.