23.08 Liontrust MA Quarter In Review Q2 Literature (Single) - Flipbook - Page 30
MA Dynamic Passive
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 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.
30 - 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.
Our holdings in equities and bonds delivered mixed performances.
The US, Japan and Europe ex-UK contributed the most on the
equities side while high yield bonds provided the only positive
fixed income contribution.
Leading equity performers included L&G US Index, HSBC
American Index, iShares Japan Equity Index, HSBC Japan Index,
iShares Continental Europe Equity Index and HSBC European
Index. iShares Fallen Angels High Yield Corporate Bond, iShares
Euro High Yield Corporate Bond ESG and iShares USD High Yield
Corporate Bond ESG were also key contributors.
Corporate bonds and medium gilts were the most significant
detractors from performance, with 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 weighing here. Emerging markets
detracted the most from performance on the equities side through
iShares Emerging Markets Equity Index and L&G Emerging Markets
Equity Index.
Alternative holdings also weighed, with iShares Physical Gold the
most significant detractor.
