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Global Leaders Equity Portfolio: July 2023

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 Leaders Model Portfolio by 5.2%. Alibaba was the best performing holding increasing 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 saw the company’s shares increase in price. The two energy services companies held also performed well with Schlumberger share price gaining 18.8% and Halliburton’s 18.5%.

Samsung was the worst performing holding declining 1.8%. The firm indicated weak demand for older chips given lower consumer electronics end demand, however the indicated that memory pricing is now beginning to improve. Microsoft reported impressive results with earnings rising 20.6%, however the slowing growth of intelligent cloud probably prompted some profit taking despite the encouraging prospect of bundling Artificial Intelligence to the firm’s office offering. The Microsoft share price fell 1.7%.

Financial conditions remain fairly loose, market multiples are somewhat elevated and as we wrote last month there is beginning to be widespread interest in companies with exposure to artificial intelligence. Interestingly the VIX indictor of market risk is very depressed, suggesting perhaps that too much money has sat on the side-lines during the equity rally seen so far in 2023. The historic pattern of seasonality, as well as some areas of exuberance suggests more volatile times are ahead.