Market Update – June 2023

This midway point of 2023 offers a natural moment to reflect on what has taken place so far this year, and to also consider what we can expect from the next six months. Looking back, it is clear that the last two quarters have performed a lot better than expected at the start of the year by cautious strategists and investors.

In fact, on both ends of the scale there have been many unexpected events within the financial world so far this year. Initially, it was widely expected that the US and the UK would experience a recession, however, this was narrowly avoided. On the other end of the scale, some areas of Europe have experienced a slowdown in the manufacturing industry, and China has not had the post lockdown recovery that was expected.

However, experts still predict a long road to recovery ahead for the global economy, and that central banks will persist with tight monetary policy. This shall only ease if we see that inflation is permanently contained, or a financial catastrophe rears its head. This may be a real possibility to some, given the continued rise in interest rates seen in the last year. There will ultimately be negative consequences for many, as business sustainability becomes an increasing concern and those coming to the end of fixed rate mortgage deals feeling the pinch of higher borrowing costs.

It is still widely believed that, if a recession were to occur, it would be relatively shallow, because neither consumers nor companies are excessively stretched as they were pre 2008/09.  However, central banks have certainly had some hard lessons to learn during that time, one being to backstop the banking system with liquidity when required. This was evidenced with how well the financial system coped with the collapse of some US banks earlier in the year and with Credit Suisse’s rescue by rival UBS.

Despite risk assets being very resilient in the midst of the turmoil, a direct consequence of this may be to expect a period of retrenchment in the appetite for risk assets, as people may favour the security of cash. However, for many it may be wise to, despite erring on the side of caution, consider some targeted risk when looking at longer term financial planning.

If you have any questions following this update or would like to discuss your investment plans, please do not hesitate to get in touch with an Integrity365 Independent Financial Adviser on 0117 450 1300.