It was only a few months ago that everyone was feeling good about the dollar weakening and the 10-year Treasury Yield falling from 5% in October 2023 to just 3.7% as markets priced in a slowing US economy and further cuts by the Federal Reserve (source: EPIC Investment Partners). Most asset classes were resplendent.
The election of Donald Trump has changed the narrative somewhat, with a series of data points signifying a more resilient outlook. Good news for the economy but not necessarily for investment markets.
Bonds are indicating stresses across the markets. At the long end of the bond market, rates are rising at the same time as the Federal Reserve reducing rates. We explore further what might be going on later in this communication.
We will also look at the implications for the Far East. On Wednesday emerging markets fell over fears of a stronger dollar and the possible impact of Trump’s tariffs. However, as always, a sense of perspective is required. All our investment portfolios are showing a positive return so far for the year. It’s amazing how quickly markets can swing on small changes in data, something we have seen this week.
Obviously, over the medium to long term, this is just noise but in isolation, negative news flow can be overwhelming at times, and can skew behaviours. The intention, of course, is to steer you through the noise and allow you to make sense of what’s going on.
On our agenda this week:
- Investment performance
- What’s happening with bond rates?
- Should we be alarmed at bond yields rising?
- The Treasury is defending Reeves’s Budget
- Could there be some winners?
- How have technology stocks fared?
- Equity markets like the data
- Now we await Trump’s inauguration
- Summary
Investment performance
I thought I’d start off this week by highlighting the best and worst performance of our model portfolios since the 1st of January 2025. The aim is to demonstrate that, despite the news flow and volatility, it is growth stocks which are performing best. But even our more cautious portfolios with more exposure to bonds, are in positive territory.
Continues…
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Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.