Investor confidence is low and financial markets are characterised by considerable uncertainty. Aggressive rhetoric from the Federal Reserve on the path of US interest rates pushed the dollar higher and undermined growth stocks. Elsewhere, equity market weakness was less pronounced as local currencies absorbed some of the pressure. In contrast to the Federal Reserve, which is faced with a particularly acute labour market problem, other central banks are tightening less aggressively. ECB. The fund returned 0.1% versus the MSCI Europe Index that delivered -1.0%.

The bear case for equities is straightforward: inflation is rocketing; growth forecasts have been downgraded; central banks are behind the curve; and valuations are high relative to history. We are mindful that at times of stress optimism is seen as naïve at best or at worst cynical and self-serving. We do believe, though, that there are reasons to be positive. Equity markets function as a discounting mechanism and financial conditions have already tightened considerably. Growth may slow further but we feel this is more likely to be a growth ‘wobble’ than a full-blown recession. We might be wrong, of course, but many cyclical stocks have already endured significant corrections and are trading at attractive valuations. Interestingly, some consumer businesses, have seen their shares initially sell-off on earnings disappointments but quickly recover and trade back to previous levels. At the risk of stating the blindingly obvious, in such an environment stock-picking is key.

With interest rates moving higher the investing backdrop continues to evolve. Most significantly, valuation is relevant again. In an environment of extremely loose monetary policy narrative has often trumped everything else, but with liquidity tightening greater importance is attached to the fundamentals. Highly rated growth companies may enjoy a sharp bounce as we reach the peak in interest rate expectations, but as markets normalise we expect the divergence in valuations to be considerably lower than has recently been the case.

Alpha Financial Management rose sharply as its trading update revealed that current trading was ‘significantly ahead of current market expectations’. The group commented that high client demand across all its major geographies and verticals had delivered strong double-digit organic revenue growth and further margin improvement. Calnex Solutions gained as the company released a further positive trading update. Not only will results come in ahead of expectations, but the order book is at record levels. With strong demand for its products and a nascent opportunity in the data centre market, the outlook remains very positive. Dalata jumped as REVPAR recovered to above 2019 levels. Smith & Nephew bounced as revenue growth was ahead of the market’s expectations. While there are legitimate concerns over whether the company has sufficient scale to compete with larger US competitors, we feel growth will rebound as economies open up and the rate of elective surgeries accelerate.

Sedana Medical declined sharply for little fundamental reason. The number of ventilated patients declined but the company continues to hit all its key milestones. Prudential underperformed as investors fretted over the impact further Chinese lockdowns would have on the group’s sales activity.

The weakness in cyclical stocks was used to take a new unit in IMI.

Investor confidence is low and financial markets are characterised by considerable uncertainty. Aggressive rhetoric from the Federal Reserve on the path of US interest rates pushed the dollar higher and undermined growth stocks. Elsewhere, equity market weakness was less pronounced as local currencies absorbed some of the pressure. In contrast to the Federal Reserve, which is faced with a particularly acute labour market problem, other central banks are tightening less aggressively. ECB. The fund returned 0.1% versus the MSCI Europe Index that delivered -1.0%.

The bear case for equities is straightforward: inflation is rocketing; growth forecasts have been downgraded; central banks are behind the curve; and valuations are high relative to history. We are mindful that at times of stress optimism is seen as naïve at best or at worst cynical and self-serving. We do believe, though, that there are reasons to be positive. Equity markets function as a discounting mechanism and financial conditions have already tightened considerably. Growth may slow further but we feel this is more likely to be a growth ‘wobble’ than a full-blown recession. We might be wrong, of course, but many cyclical stocks have already endured significant corrections and are trading at attractive valuations. Interestingly, some consumer businesses, have seen their shares initially sell-off on earnings disappointments but quickly recover and trade back to previous levels. At the risk of stating the blindingly obvious, in such an environment stock-picking is key.

With interest rates moving higher the investing backdrop continues to evolve. Most significantly, valuation is relevant again. In an environment of extremely loose monetary policy narrative has often trumped everything else, but with liquidity tightening greater importance is attached to the fundamentals. Highly rated growth companies may enjoy a sharp bounce as we reach the peak in interest rate expectations, but as markets normalise we expect the divergence in valuations to be considerably lower than has recently been the case.

Alpha Financial Management rose sharply as its trading update revealed that current trading was ‘significantly ahead of current market expectations’. The group commented that high client demand across all its major geographies and verticals had delivered strong double-digit organic revenue growth and further margin improvement. Calnex Solutions gained as the company released a further positive trading update. Not only will results come in ahead of expectations, but the order book is at record levels. With strong demand for its products and a nascent opportunity in the data centre market, the outlook remains very positive. Dalata jumped as REVPAR recovered to above 2019 levels. Smith & Nephew bounced as revenue growth was ahead of the market’s expectations. While there are legitimate concerns over whether the company has sufficient scale to compete with larger US competitors, we feel growth will rebound as economies open up and the rate of elective surgeries accelerate.

Sedana Medical declined sharply for little fundamental reason. The number of ventilated patients declined but the company continues to hit all its key milestones. Prudential underperformed as investors fretted over the impact further Chinese lockdowns would have on the group’s sales activity.

The weakness in cyclical stocks was used to take a new unit in IMI.