Market Review
The fourth quarter was broadly positive for the performance of equities and fixed income, as several of the themes driving markets in previous quarters reversed and expectations of a 'soft landing' became more widespread.
Markets were buoyed by signs that the US Federal Reserve (Fed) might start to change its monetary policy stance and move into a rate-cutting cycle, as inflation showed signs of slowing. In November, the US Personal Consumption Expenditure index – a key bellwether for the Fed – rose at an annual rate of 3.2%, which was below many economists’ expectations. Broad-based falls for commodity prices, with the price of a barrel of oil falling from $90 in October to just over $70 by the end of the year, further strengthened sentiment.
Fund Activity
During the period, the fund produced a strong positive return. Positive performance came fairly evenly from the fund’s equity and fixed income holdings. Within the UK equity allocation, names that did particularly well included BAE Systems and Persimmon while Microsoft and Broadcom were among largest contributors among global equities.
On the fixed income side, the main positive contributors were corporate bonds, particularly those that were sterling-denominated, and those with exposure to sectors such as pharmaceuticals and tech. Positive performance within the allocation to alternatives came from both REIT holdings and infrastructure names.
Outlook
With inflation starting to approach central bank target levels and expectations for more robust economic conditions strengthened, this broadly improved investor sentiment. However, some forward-looking indicators – such as manufacturing data – have yet to provide signs of an obvious economic recovery and a continued rise in debt delinquency rates during the fourth quarter suggests higher rates are starting to bite.
Overall, we need to see some reconciliation between economic data and financial market pricing before we can be strongly confident about a soft landing.
Important information
The value of investments may fall as well as rise and investors may not get back the amount invested.
The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice.
The fund may invest in property funds that may be illiquid and subject to wide price spreads, both of which can impact the value of the fund. The value of the property is based on the opinion of a valuer and is therefore subjective.
This document is issued for information only by Canada Life Asset Management. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available in the literature section.
Promotion approved 19/01/24
