There have been some signs that inflation had peaked around the world and is on the way back down.
UK inflation came in at 10.1% in March, down from 10.4% in February. However, it’s likely that the Bank of England will have to continue raising interest rates to tame rising prices.
Euro zone inflation is also falling. Inflation fell to 6.9% in March as energy prices continued to decline. European countries that were highly reliant on importing their energy faced high inflation after the Russia and Ukraine war caused energy prices to soar. A milder winter and higher than expected energy reserves have brought the price of energy back down and inflation with it.
Inflation in Japan appears to have also peaked. In February it fell to 3.3%, down from its high of 4.3%. The incoming Central Bank Governor Kazuo Ueda has said rising costs of imported commodities were the cause for inflation, rather than strong demand.
Unlike most major economies, the Bank of Japan hasn’t raised interest rates in order to battle inflation. Ueda has reiterated that he believes keeping interest rates negative was still appropriate for achieving their inflation target.
Is the US labour market finally cooling?
With US inflation looking like it peaked in June 2022 at 9.1%, it’s been on a steady decline for the nine months following, falling to 5% in March.
The US Federal Reserve (Fed) has continued to raise interest rates in a bid to bring inflation back down towards its 2% target. Inflation has become increasingly sticky, in part due to the strong labour market. However, could it finally be starting to show signs of weakness?
In March, the largest economy in the world added 236,000 new jobs. Well below the 326,000 added in February and significantly below the 472,000 added in January. This has raised investors’ hopes that inflation will continue to fall, and we could be near the peak of the Fed’s interest rate raising cycle.
China continues push for economic growth
After years of COVID-19 restrictions, China reported inflation in March at 0.7%. Able to re-open without the shackles of above target inflation, China looks set to re-establish itself as one of the fastest growing economies.
China has set a 5% growth target for 2023, significantly above the 3% growth it achieved last year. With the loosening of restrictions, Beijing is hopeful strong consumer spending will help drive economic growth in 2023. Retail sales rose 3.5% for the first two months in 2023 and in turn the service and manufacturing sectors also grew.
Lots of the countries China exports to are suffering with high inflation. However, that didn’t stop exports increasing 14.8% in March, well above expectations.
China does still face headwinds though. The economy is still dealing with an ongoing property crisis as demand for houses fell significantly during the pandemic. This caused defaults among some of the largest property developers in the world. The People’s Bank of China cut the country’s reserve requirement by 0.25%, effectively allowing banks to increase lending to encourage spending on property.
How have global markets performed?
Global stock markets have delivered mixed results over the 12 months to the end of March. Over the past year, the broader global stock market has fallen 0.88%*. As always though, past performance isn’t a guide to future returns.
The FTSE Europe ex UK index rose 8.72% over the past 12 months. Investors have turned to European shares with hopes that interest rates might not have to rise as high as other countries as they battle to push lower inflation towards target.
The Chinese market on the other hand, fell by 6.91% over the past 12 months. It had a slow start to the year as concerns around the growth of the economy would be well below the government’s target as the country remained in lockdowns.
In October President Xi started to loosen the restrictions. Since then, the market has subsequently rebounded as consumers were able to go out and spend, as well as go back to work, improving the country’s exports market.
Oil and gas had the highest returns of any sector over the past 12 months with a gain of 13.65%.
Commodity prices, although lower than their previous highs, remain at elevated levels. Fears of a deep recession appear to be easing. The consensus now is that lots of economies across the world will enter either a shallow recession or perhaps avoid one altogether. This, along with the Chinese re-opening, means that demand for commodities, like oil and gas, has remained high.
Financials had the lowest returns over the past 12 months, returning -4.25%. Concerns over bank liquidity contributed to a poor 12 months for the financial sector. US banks SVB and Signature collapsed as investors rushed to withdraw their deposits.
One-year stock market performance
Past performance isn’t a guide to future returns. Source: *Lipper IM, to 31/03/2023.
Annual percentage growth
| Mar 18 – Mar 19 | Mar 19 – Mar 20 | Mar 20 – Mar 21 | Mar 21 – Mar 22 | Mar 22 – Mar 23 | |
|---|---|---|---|---|---|
| FTSE All World | 10.73% | -6.22% | 39.58% | 12.75% | -0.88% |
|
FTSE AW/Financials |
4.09% | -15.63% | 36.54% | 17.16% | -4.25% |
|
FTSE AW/Oil & Gas |
12.24% | -40.35% | 37.79% | 43.86% | 13.65% |
|
FTSE China |
-5.34% | -6.85% | 41.78% | -25.22% | -6.91% |
|
FTSE Europe ex UK |
2.78% | -7.99% | 34.86% | 3.87% | 8.72% |
How have our Wealth Shortlist funds performed?
Global funds on the Wealth Shortllist delivered different performances over the past year, with some faring better than others.
Funds investing in companies undergoing a turnaround or those focused on paying a dividend, otherwise known as ‘value’ focused funds, generally did well. Those investing in companies capable of above-average earnings growth, also known as ‘growth’ funds, took a hit.
One year is a short period to assess the skills of a fund manager. Managers with different strengths, styles and areas of focus will perform differently over time.
Investing in funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a long-term diversified portfolio.
Remember, all investments can fall as well as rise in value, so you could get back less than you invest. For more details on each fund and its risks, please see the links to their factsheets and key investor information below.
Jupiter Global Value Equity has been the best-performing fund in the global sector of the Wealth Shortlist over the past 12 months.
The fund aims to invest in more value-focused companies whose shares can be bought for less than their true worth. The fund returned 14.67%* versus 2.28% for the IA global equity income sector.
The managers have benefited from the value style coming back in favour in 2022. The fund’s investments in the consumer staples and energy sectors have been beneficial with the increase in inflation and higher commodity prices favouring these sectors. The fund also invests more in Europe than in the US, which has helped performance.
The abrdn Global Smaller Companies fund was the weakest performing fund in the global sector of the Wealth Shortlist returning -10.01% over the past 12 months.
The manager’s growth-focused investment style has had a particularly tough time since the start of 2022. The fund’s investments in the US and in sectors like industrials and communication services have felt the most pain.
The fund is likely to perform better when growth investing is in favour, but not so well when value companies are in vogue. We continue to rate the team’s disciplined investment approach, it’s been used across a range of funds over the years with good outcomes.
FIND OUT MORE ABOUT JUPITER GLOBAL VALUE EQUITY, INCLUDING CHARGES
JUPITER GLOBAL VALUE EQUITY KEY INVESTOR INFORMATION
FIND OUT MORE ABOUT ABRDN GLOBAL SMALLER COMPANIES, INCLUDING CHARGES
ABRDN GLOBAL SMALLER COMPANIES KEY INVESTOR INFORMATION
Annual performance growth
| Mar 18 – Mar 19 | Mar 19 – Mar 20 | Mar 20 – Mar 21 | Mar 21 – Mar 22 | Mar 22 – Mar 23 | |
|---|---|---|---|---|---|
| Jupiter Global Value Equity Fund | -0.74% | -17.93% | 46.13% | 5.78% | 14.67% |
|
IA Global Equity Income |
8.39% | -9.58% | 32.40% | 11.90% | 2.28% |
|
abrdn Global Smaller Companies Fund |
3.03% | -12.82% | 58.39% | -2.84% | -10.01% |
Past performance isn’t a guide to the future. Source: *Lipper IM, to 31/03/2023.
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Our fund research is for investors who understand the risks of investing and that investing in funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
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