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April 11, 2023
TPP Quarter 1 Results:
The Q1 results are in. This is how The Portfolio Platform leaderboard looks after the first 3 months of 2023.
Here is an overview of how global indices have performed in the same period. It is quite clear that TPP have outperformed the market once again.
The quarter in summary:
Global equities gained in Q1, buoyed by receding recession worries in developed markets. Gains came despite the collapse of Silicon Valley Bank, which caused significant volatility in bank shares. Growth stocks outperformed value in the quarter. In fixed income, government bond yields fell (meaning prices rose).
The top 100 rose very slightly, but on the whole, UK equities just went sideways with no real gains over the quarter. Economically sensitive areas outperformed, in line with other markets. This occurred amid hopes that central banks might be in a position to ‘pivot’ to cutting interest rates in late 2023.
Industrials outperformed as did the consumer discretionary sector. The latter reflected a very strong recovery in many domestically focused areas. These bounced back as it transpired the UK economy had performed resiliently during the energy crisis.
The latest quarterly GDP data from the Office for National Statistics revealed that the UK economy actually grew very slightly in Q4 2022, contrary to consensus expectations. As a result, the economy dodged a technical recession.
The short-lived market turbulence that followed the collapse of Silicon Valley Bank (SVB) in March did not prevent investor optimism leading US stocks higher over the quarter. The Federal Reserve raised rates twice, and data indicated that inflation is cooling, leading to expectations the hiking cycle could shortly come to an end.
The collapse of SVB, followed shortly by further financial sector disruption in Europe, caused stocks to dip sharply in March. The Fed expressed confidence in the resilience of the US banking system and raised the policy rate by 25 basis points in both February and March.
This took borrowing costs to the highest point since 2007. However, inflation – as measured by the core personal consumption expenditure (PCE) index – climbed less than expected in March, leading to speculation that further rate hikes will be limited.
The financial sector, perhaps surprisingly, largely shrugged off the events surrounding SVB as investors concluded that the systemic risk was minimal. It was stocks in the energy and healthcare sectors which lagged the most over the quarter. Tech stocks made some of the strongest gains.
Eurozone shares notched up strong gains in Q1 despite volatility in the banking sector, Credit Suisse and Deutsche Bank in particular, having problems. The issues were contained with UBS stepping in and acquiring Credit Suisse. There doesn’t seem to have been any further contagion within the sector.
Gains were led by the information technology, consumer discretionary and communication services sectors. Laggards were real estate and energy.
The European Central Bank raised interest rates by 50 basis points in both February and March. Eurozone inflation declined to a one-year low in March.
Consumer prices rose by 6.9%, down from 8.5% in February. However, core inflation (excluding food and energy costs) rose to 5.7% from 5.6%.
Asian equities were overall positive in the first quarter, but there were weak performances by Hong Kong, India and Malaysia.
Chinese shares achieved robust gains at the start of the quarter after Beijing loosened its Covid-19 restrictions that had constrained the country’s economic growth. Supportive property market measures and a loosening of the regulatory crackdown on China’s technology companies also bolstered investor sentiment.
South Korea and Taiwan achieved robust gains in January, while India ended the month in negative territory, amid a sell off by foreign investors and investor caution as economic growth stalled.
Fears of a global recession weakened investor sentiment towards the region in February, with Thailand, Malaysia and South Korea experiencing sharp falls as investors took profits following a strong performance in January on investor optimism sparked by China’s reopening.
The S&P GSCI Index recorded a negative performance in the first quarter. Energy and livestock were the worst-performing components of the index, while precious metals and industrial metals achieved price gains.
Within energy, prices for natural gas, gas oil and heating oil were all sharply lower.
In precious metals, gold achieved a robust price gain while silver achieved a more modest price uplift.
Within industrial metals, the price of nickel was sharply lower in the first quarter, while the decline in the price of lead was more muted. Copper and aluminium prices both advanced in the quarter.
TPP outperformed again in a solid Q1.
All in all, it wasn’t a bad quarter given the potential threat posed by the collapse of Silicon Valley Bank. Most of the fallout was contained by fast acting governments and central banks.
Everyone is still all too aware of how quickly things can escalate, so their speed of action put the fire out quickly and not too much harm was done.
Having said that, the markets did fall, particularly in the UK, which relies heavily on financials and has yet to really recover.
Investors are always quick to sell and much slower to buy back in.
Confidence will return, and assuming there are no more surprises in the closet, we look forward to another good quarter ahead.
We said this year would be one with high volatility but lacking in any real direction. So far, we’ve seen it move aggressively in both directions, although with a little more up than down despite everyone’s fears.
For us at TPP, this volatility has proven to be the fantastic opportunity we were hoping it would be. We ask our traders to just try and beat their benchmark year after year, and once again, we’ve done that in Q1. Several have already double digit returns. Long may that continue and we hope your portfolios are giving you the profits you’ve come to expect from us.
The current TPP market bias:
The majority of our traders have just completed an excellent Q1, in what has been a very challenging trading climate.
It seems that many of the ‘buy or flats’ and the ‘active’ strategies have timed many of the short/mid term moves fantastically well.
A few strategies which are mainly long have struggled but in time- we would expect they’ll be back. In fact, they've already started to climb.
This current level in many global stock markets most likely provides a great long term buying opportunity. This banking issue is not the same as 2008 and shouldn’t be treated as such. There isn’t a problem within the banking system itself, just a few mismanagement issues in a couple of places.
For most portfolios globally the recent drops have been painful, and the drops have been big, but ultimately, at TPP we like these drops so that we can buy in cheaper or buy back the shorts. Picking the bottom or the top is just not an option, but making money from something close is.
One thing is for sure, our traders will be looking to continue recent momentum in this new quarter.
If you have an underperforming portfolio or are sitting in cash waiting for an opportunity- contact our team for a FREE consultation.
Don’t just hear about the investment revolution:
“TPP might just be about to revolutionise investment for the retail market.”
- London Stock Exchange 2020