St Ledger’s Day is rapidly approaching. And according to the old city adage investors should have returned from their summer break in a positive mood. Yet Covid continues to dominate the headlines and even with the success of the vaccination campaign infections are rising, supply chains are faltering, and economic momentum is slowing. But despite the recent deceleration the underlying economy is strong. Consumer and corporate balance sheets are robust and there is considerable pent-up demand. The reflation trade has paused but is not over. The fund returned 2.4% versus 2.5% for the MSCI UK Index.

In a much anticipated speech to the Jackson hole gathering of central bankers, the chair of the Federal Reserve sent a strong hint that the Fed will begin tapering this year. The psychological impact of the move will be considerably greater than its mechanistic impact. Investors should focus on the positive signal that tapering sends; the economy is healing and stimulus can begin to be withdrawn. Tapering may lead to a short term increase in volatility but it will not derail the bull market. Equity markets function as a discounting mechanism and will not correct until collectively investors believe the end of the economic cycle is in sight. Many things can change the collective mindset, often with little warning, but for the moment the path of least resistant is higher.

The UK’s corporate reporting season got off to a strong start. One of the peculiarities of the UK’s corporate calendar is the mid August break with companies generally choosing either to report early in the month or wait to the beginning of September. The majority of earnings releases so far have been upbeat. Companies have been incrementally positive on the outlook, even if they have highlighted ongoing covid uncertainty. Despite August traditionally being a slow month for M&A the attractiveness of UK assets was further highlighted by further takeover approaches.

Marks & Spencer was the largest single positive contributor to performance. The company announced results that were ahead of expectations. The upside surprise was delivered in both its food and Clothing & Home activities. That this was the first upgrade to profits for a number of years highlighted the extent of the company’s problems. However, the food business retains considerable customer loyalty while clothing has now stabilised. The strength of the food proposition is being reinforced by significant investment in the estate. The JV with Ocado retains significant optionality and if the share price recovers further we would not rule out M&S attempting to buyout Ocado’s remaining stake.

Prudential Plc gained as it released well received interim results. Numbers were strong across the board with new business sales growing 21%. Post the demerger of Jackson National later this month the group will be an Asian focused insurer trading at a significant discount to its nearest peers.

Creo Medical declined as it announced an equity raise to fund expansion. The early stage of the company’s product suite makes it almost impossible to value the business accurately. However, it offers a range of products with strong IP backing that can dramatically improve patient outcomes and reduce costs. Its MicroBlate tissue ablation device has recently been used to treat patients with unresectable pancreatic tumors with very encouraging results.

A new holding was started in Smith & Nephew.

St Ledger’s Day is rapidly approaching. And according to the old city adage investors should have returned from their summer break in a positive mood. Yet Covid continues to dominate the headlines and even with the success of the vaccination campaign infections are rising, supply chains are faltering, and economic momentum is slowing. But despite the recent deceleration the underlying economy is strong. Consumer and corporate balance sheets are robust and there is considerable pent-up demand. The reflation trade has paused but is not over. The fund returned 2.4% versus 2.5% for the MSCI UK Index.

In a much anticipated speech to the Jackson hole gathering of central bankers, the chair of the Federal Reserve sent a strong hint that the Fed will begin tapering this year. The psychological impact of the move will be considerably greater than its mechanistic impact. Investors should focus on the positive signal that tapering sends; the economy is healing and stimulus can begin to be withdrawn. Tapering may lead to a short term increase in volatility but it will not derail the bull market. Equity markets function as a discounting mechanism and will not correct until collectively investors believe the end of the economic cycle is in sight. Many things can change the collective mindset, often with little warning, but for the moment the path of least resistant is higher.

The UK’s corporate reporting season got off to a strong start. One of the peculiarities of the UK’s corporate calendar is the mid August break with companies generally choosing either to report early in the month or wait to the beginning of September. The majority of earnings releases so far have been upbeat. Companies have been incrementally positive on the outlook, even if they have highlighted ongoing covid uncertainty. Despite August traditionally being a slow month for M&A the attractiveness of UK assets was further highlighted by further takeover approaches.

Marks & Spencer was the largest single positive contributor to performance. The company announced results that were ahead of expectations. The upside surprise was delivered in both its food and Clothing & Home activities. That this was the first upgrade to profits for a number of years highlighted the extent of the company’s problems. However, the food business retains considerable customer loyalty while clothing has now stabilised. The strength of the food proposition is being reinforced by significant investment in the estate. The JV with Ocado retains significant optionality and if the share price recovers further we would not rule out M&S attempting to buyout Ocado’s remaining stake.

Prudential Plc gained as it released well received interim results. Numbers were strong across the board with new business sales growing 21%. Post the demerger of Jackson National later this month the group will be an Asian focused insurer trading at a significant discount to its nearest peers.

Creo Medical declined as it announced an equity raise to fund expansion. The early stage of the company’s product suite makes it almost impossible to value the business accurately. However, it offers a range of products with strong IP backing that can dramatically improve patient outcomes and reduce costs. Its MicroBlate tissue ablation device has recently been used to treat patients with unresectable pancreatic tumors with very encouraging results.

A new holding was started in Smith & Nephew.