23.08 Liontrust MA Quarter In Review Q2 Literature (Single) - Flipbook - Page 28
MA Blended
The performance of our multi-asset solutions reflected the mixed
fortunes of fixed income and equity markets globally. Most equity
regions were positive but fixed income generally had to contend
with rising interest rates – both actual and anticipated – which was
partly reminiscent of 2022.
Global government bonds sold off, especially US treasuries and
gilts, the former due to statements made by Federal Reserve
chairman Jay Powell that stiffer action might be needed to tackle
price rises and the latter by the Bank of England’s response to the
most elevated inflation among developed nations. Gilts plumbed
year-to-date lows.
Globally, equities were generally strong, particularly in North
America and Japan, whereas the UK, emerging markets and Asia
sold off slightly. The US saw strong gains on enthusiasm once again
for technology stocks, driven by the appetite for AI with Nvidia a
stand-out performer.
Thankfully, the ‘mini’ banking crisis seen in Q1 has so far proved to
be just that and now seems to no longer be of concern to investors.
The focus is back on inflation and how much policymakers must do
to tame it and the negative economic impact this might have.
In our most recent Tactical Asset Allocation (TAA) review, we
retained our overall positive outlook on markets and equities in
general. The underlying tone in markets has stabilised but investors’
confidence has subsided from the optimism they had earlier in the
year. They seem to have accepted what central banks were telling
them, that interest rates would have to stay higher for longer to
deal with stubborn inflation. But they are now too susceptible to
short-term developments. We agree with the short-term diagnosis
that inflation will be stickier than expected, but we disagree with
any prognosis of severe damage being caused in the long run.
Inflation is trending down, and there are opportunities now to put
investments in place for the longer term.
28 - Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q2 2023
Our negative contribution from emerging markets (EMs) in Q2
followed two previous quarters of positive contributions from the
region. As so often, the performances of individual countries within
EMs were mixed: India did well on encouraging economic data,
and Brazil and eastern European countries progressed on hopes of
interest rate cuts and other positive news. But worries over China’s
post-Covid economic recovery running out of steam and political
tensions with the US were major negatives for EMs, while South
Africa performed badly amid its ongoing power crisis.
Positive contributions to performance came from US, Japan and
Europe ex UK equities, and high yield bonds. Key contributing
equity funds included L&G US Index, Ossiam Shiller Barclays CAPE
US Sector Value, AB American Growth, Loomis Sayles US Growth
Equity, Man GLG Japan Core Alpha Professional, iShares Japan
Equity Index, Liontrust European Dynamic and BlackRock European
Dynamic. Barings Global High Yield Bond and iShares Euro
High Yield Corporate Bond ESG were the leading fixed income
contributors.
Negative contributions to performance came most significantly from
corporate bonds and medium gilts, and from emerging market,
developed Asian and UK equities. Poor performers included
Vanguard UK Investment Grade Bond Index, iShares Corporate
Bond Index, iShares UK Gilts All Stocks Index, L&G All Stocks
Gilt Index and Vanguard UK Government Bond Index on the
fixed income side. Poor equity performers included L&G Emerging
Markets Equity Index, Vontobel mtx Sustainable Emerging Markets
Leaders, Fidelity Asia Pacific Opportunities, L&G Pacific Index and
Federated Hermes Asia ex Japan Equity.
Our holding in alternatives was also a negative, with iShares
Physical Gold and L&G Global Infrastructure weighing slightly.
