The outlook for inflation and by extension interest rates once again determined market direction. Equities sold off early in the month but rallied post the release of the minutes of the latest Federal Reserve Board meeting. Investors were comforted that members of the FOMC appeared to realise the nuances around the inflation outlook and that the Fed was not stuck on autopilot. The positive sentiment was reinforced by strong earnings from US retailers Dollar Tree and Macy’s, which reassured investors post disappointing updates from Target and Walmart. The pattern of consumption maybe changing but overall expenditure currently remains robust. The fund returned 1.2% versus the MSCI UK index that returned 0.9%.

The economic outlook remains clouded. The conflict in Ukraine is ongoing and continues to put upward pressure on commodities, most notably wheat and oil. China is zealously pursuing its zero Covid policy with an obvious impact on economic growth. Chinese retail sales fell 11% in April. Elsewhere, both consumer and business confidence have sharply deteriorated. Despite these headwinds, earnings expectations are holding up reasonably well. This has been interpreted negatively in some quarters as many investors believe we need to witness more significant downwards revisions for the market to bottom. Equities may remain choppy over summer until the outlook for earnings becomes clearer, but should the economy prove more resilient than the current negative consensus then the upside in some sectors and stocks could be significant. Interestingly, in the last month corporate executives in the US bought shares in their companies at the highest rate since the financial crisis.

Marks & Spencer rallied to post a reassuring update that demonstrated the resilience of their model. Clothing and home sales exceed 2019 levels as consumers faced less restriction and the food business sustained its recent strong performance growing revenue 8%. Management haven’t seen a slowdown in the business but are prudently expecting a weaker second half of the year and shaved forecasts slightly. Investors looked through the short-term downgrades and the shares bounced strongly. With unemployment low and wage growth robust we believe the risk of the much-vaunted consumer crisis is overdone.

Our faith in the resilience of the consumer was well established before the Chancellor unveiled his latest package of support. As such the economic merits of the additional help for the consumer are debatable but the political reality was clear. The case for partially funding the largesse via a windfall tax on energy companies, however, is misguided and short sighted. The UK cannot, and should not, try to compete with low tax jurisdictions such as Ireland. But rather should focus on providing a transparent and predictable fiscal regime, especially for long term capital projects where initial financial commitments are large. By introducing a windfall tax, the government has obscured the market’s price signals and, in all likelihood, exacerbated the long-term supply situation.

Serco rose as it increased its underlying profit guidance by 15%. The strength of its new business pipeline means operating profit will now be close to 2021’s level despite the ending of the UK Test & trace and AWE contracts. Homeserve jumped as the company announced it was recommending a takeover of the business as £12 a share. Reach declined as the economic uncertainty weighed on advertising spend.

A new position was started in JD Sports post the weakness in the share price.

The outlook for inflation and by extension interest rates once again determined market direction. Equities sold off early in the month but rallied post the release of the minutes of the latest Federal Reserve Board meeting. Investors were comforted that members of the FOMC appeared to realise the nuances around the inflation outlook and that the Fed was not stuck on autopilot. The positive sentiment was reinforced by strong earnings from US retailers Dollar Tree and Macy’s, which reassured investors post disappointing updates from Target and Walmart. The pattern of consumption maybe changing but overall expenditure currently remains robust. The fund returned 1.2% versus the MSCI UK index that returned 0.9%.

The economic outlook remains clouded. The conflict in Ukraine is ongoing and continues to put upward pressure on commodities, most notably wheat and oil. China is zealously pursuing its zero Covid policy with an obvious impact on economic growth. Chinese retail sales fell 11% in April. Elsewhere, both consumer and business confidence have sharply deteriorated. Despite these headwinds, earnings expectations are holding up reasonably well. This has been interpreted negatively in some quarters as many investors believe we need to witness more significant downwards revisions for the market to bottom. Equities may remain choppy over summer until the outlook for earnings becomes clearer, but should the economy prove more resilient than the current negative consensus then the upside in some sectors and stocks could be significant. Interestingly, in the last month corporate executives in the US bought shares in their companies at the highest rate since the financial crisis.

Marks & Spencer rallied to post a reassuring update that demonstrated the resilience of their model. Clothing and home sales exceed 2019 levels as consumers faced less restriction and the food business sustained its recent strong performance growing revenue 8%. Management haven’t seen a slowdown in the business but are prudently expecting a weaker second half of the year and shaved forecasts slightly. Investors looked through the short-term downgrades and the shares bounced strongly. With unemployment low and wage growth robust we believe the risk of the much-vaunted consumer crisis is overdone.

Our faith in the resilience of the consumer was well established before the Chancellor unveiled his latest package of support. As such the economic merits of the additional help for the consumer are debatable but the political reality was clear. The case for partially funding the largesse via a windfall tax on energy companies, however, is misguided and short sighted. The UK cannot, and should not, try to compete with low tax jurisdictions such as Ireland. But rather should focus on providing a transparent and predictable fiscal regime, especially for long term capital projects where initial financial commitments are large. By introducing a windfall tax, the government has obscured the market’s price signals and, in all likelihood, exacerbated the long-term supply situation.

Serco rose as it increased its underlying profit guidance by 15%. The strength of its new business pipeline means operating profit will now be close to 2021’s level despite the ending of the UK Test & trace and AWE contracts. Homeserve jumped as the company announced it was recommending a takeover of the business as £12 a share. Reach declined as the economic uncertainty weighed on advertising spend.

A new position was started in JD Sports post the weakness in the share price.