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Global Equity Growth Portfolio: August 2022

August was a month of two halves for equity investors. With much of the developed world on vacation, market volatility is often reduced, and traded volumes can be more modest than normal. In the first two weeks of August markets rose. As those who read our commentaries know a core belief is that movements in equity prices depend to a large extent on global money supply which has been greatly distorted by central banks in recent years.  Many market participants had continued to expect a supportive monetary policy outlook from the head of the world’s most important central bank, even as quantitative easing has reversed to quantitative tightening. Complacency of markets was punctured by the Federal Reserve Chairman, Jerome H. Powell, in his speech at the Jackson Hole conference. We’d encourage investors to read the short speech verbatim. Three key lessons were laid out all relating to; the bank’s job in manging inflation, preventing inflation expectations becoming embedded in society, and not stopping measures to cool inflation too early. Notably absent were references to employment


Bond markets have been indicating a risk-off environment for some time. Equites being quasi-perpetual investments ought to attract investors that are very forward looking and who can look through periods of economic stress. In practice however, emboldened by an ultra-lose monetary policy there is little doubt that many view the asset class purely speculatively. More than double the total number of shares in issue in Bed Bath and Beyond for instance, traded in a single day during the month: an average holding period of less than half a day.

The global equity index (FTSE All World) declined 3.6%. Given market exposures and the bigger than market falls observed in classic growth stocks, we would anticipate that the Global Equity Growth strategy would perform worse than the index. Pleasingly this was not the case, and the strategy delivered a more modest decline of 2.6% in USD terms.

Trading was elevated during the month with the sale of Wickes after disappointing guidance at earnings, and the disposal of the metal and mining exposure. New positions were added to Trip Advisor and Nvidia which respectively were the best and worst performing stocks held during the month.

Trip Adviser (+25.8%) was spun off from Expedia Group in 2012 and is a leading global travel site in the process of better monetising its large user base. The company announced positive earnings and an encouraging outlook as consumers return to travel. Lancashire (+7.1%) and Alibaba (+6.8%) pleasingly, after the significant underperformance experienced from the Chinese holdings, these performed relatively well during the month buoyed by relaxation of Covid lockdowns, reduced tensions with Taiwan and additional fiscal measures announced by the government.

There was general weakness amongst the share prices of higher growth companies during the month which also saw some concerns mount generally over demand within the semi-conductor industry. We would not rule out inventory builds in the short-term, however this is likely to be softened by persistent shortages in parts of semi-conductor supply chain. The semi-conductor industry is by its very nature, cyclical; however, we invest through the cycle as we believe the strong secular growth trends in the industry remain robust despite the short-term weakness. The worst performing stocks held during the month were Nvidia (-18.2%), Align Technology (-13.3%) and NXP Semiconductor (-10.5%).

There are several ways that inflation will eventually permit more dovish central bank policies. The most likely near-term outcome however is for inflation to be tamed by the central banks’ removing liquidity from the world. This will continue to be put pressure on asset prices.