July saw continuing signs of slowing inflation in developed markets. Inflation is one of the core metrics that central banks seek to control. With slower inflation market expectations shifted to suggest that we are now at or close to peak interest rates. In other words the outlook for quantitative tightening is lower and hence risk assets performed relatively well. The month saw earnings from a large number of portfolio holdings which pleasingly were generally positive.
The FTSE All World index increased 3.7% and the Ashburton Global Equity Growth model portfolio 5.0%. Patterson shares rose 32.3%, along with other oil services companies, responded positively to a rising oil price due to production cuts by OPEC. The Alibaba share price increased 22.6%. Opinions on the outlook for China remain mixed, but easing regulatory pressure on the technology sector, combined with stimulus measures and low multiples proved positive for returns.
On the negative side Luxfer reported slightly lowering full year guidance and saw shares decline 10.2%. The firm is suffering from shortages in US magnesium. Management remains committed to a target of $2 of earnings per share by 2025, 400% higher than the current run rate, driven by a return to normal supply and from anticipated demand for cylinders to be used for hydrogen storage. Despite a very encouraging earnings release Enphase lowered their guidance and their shares fell 9.3%.
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