Monthly Review – January 2023
OUR PERSPECTIVE
2023 has got off to a strong start. Ordinarily that would not concern us, but the fact that the “leadership” of this rally has come from those sectors / areas which represented all the gross excesses and overvaluations resulting from the very generous monetary and fiscal stimulus seen over the last decade, and which were the securities which therefore sold-off most sharply last year, forces us to view January’s rally through a more cautious prism. It has already been dubbed “the dash for trash” rally, but as ever time will tell.
Our concerns stem equally from the market’s apparent desire to ignore central bank guidance, which is not necessarily always a good thing. Central banks believe that, notwithstanding a marked trend lower in headline inflation rates (supply side) they are still worried by what they believe to be tight labour markets and what this might mean in terms of a higher wage demands (demand side) resulting in an overall rate of inflation which does not fall as swiftly as many project. Their view is that it is too early to declare “victory” in the battle with inflation. We agree.
This apparent stand-off between investors and central banks presents a potentially dangerous investment environment, particularly given higher valuations post the January rally. Caution is still warranted.
Read more in our Q4 Quarterly Review.
EQUITIES
In our opinion, the equity market rally is nothing more than a bear-market rally. It’s been the best January for the Nasdaq Composite Index since its notched up 12.2% in January 2001. The index finished that year down -21%! With the exception of perhaps China and Japan, we believe Equities remain expensive with an unattractive risk-reward potential.
FIXED INCOME
Given the worst year on record for the Bloomberg US Aggregate Index, we expect the index to deliver strong performance in 2023. Bonds generally are more attractive today than at any point over the last decade. Whilst we remain nervous on credit given the economic outlook, we are positive on US Treasuries.
REAL ASSETS
We remain underweight property given prices does not reflect the significant change in interest rates. We remain positive on the outlook for infrastructure however, especially in the renewable and digital infrastructure space.
Within the commodity complex, we remain positive on the longer-term trends. However, in the near term the risk of an economic downturn could put further pressure on prices, and we remain underweight generally. We are however very positive on gold, which should benefit from a turn in liquidity, a weaking USD and falling real rates.
SPECIALIST STRATEGIES
Specialist strategies continue to play a significant role in our portfolios. Managed futures and trend-following strategies continue to provide us with uncorrelated market exposure, and we believe the opportunity set for idiosyncratic strategies, including Arbitrage, Relative-Value and Fundamental Macro remain attractive.
CURRENCIES
Generally, we remain neutral on currencies. Whilst we believe the USD is oversold, the trend remains negative – and as we know, currencies are dominated by trends. The JPY is however one currency we are bullish on, undervalued and under-owned, with some catalysts for further strength.
CONTACT US
For further information on any of our services, or if you would like to arrange a meeting with an investment manager to see how we can work with you, please get in touch.
Disclaimer:
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Important information
Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office: Floor 3, 36-38 Cornhill, London, EC3V 3NG. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.
Disclaimer:
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.
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