Lowes MPS - Quarterly Reports

Although further interest rate hikes are still forecast from year end levels in the UK, Europe and US, the market began to price in the possibility of interest rate cuts in the US for the second half of 2023. This was on the basis of inflation falling from its peak and also the threat of recession. This was somewhat at odds with the US Federal Reserve however, who believe that there is little likelihood that cuts will be seen in 2023. Whilst interest rates in the US therefore are likely to peak in the first half of 2023, it remains to be seen therefore whether we will see a full ‘Fed pivot’.

Performance The portfolio outperformed the sector average during the quarter, posting a return of 4.18% which compared to 3.05% for the IA Mixed Investment 20-60% Shares sector average. In absolute terms the strongest performing underlying fund was the Vanguard FTSE UK Equity Income Index. UK equity income enjoyed a strong return for the period, with the index sector composition helping. Investors can also look to equity income, in particular dividend growth, as a partial hedge against inflation. Companies which are able to pay dividend and growing dividends can also add an element of defence to a portfolio given the ability of companies to pay such in periods of economic weakness. Weaker performers included property funds allocated to, in particular the L&G UK Property Feeder fund. Higher bond yields made this asset class less attractive to some investors, coupled with concerns that a protracted economic slowdown/recession would be negative for capital values. Whilst we monitor closely, we continue to see property as an alternative, diversifying income stream for the portfolio. Portfolio Activity and Positioning There were no changes made to the portfolio during the quarter. As there were no changes made to the portfolio in the third quarter also, the portfolio will be rebalanced in the first quarter of 2023, returning the underlying funds to their original allocations. We continue to review the equity/fixed income balance in light of the higher yields now available from the latter. This analysis also includes duration/interest rate sensitivity within those fixed income funds held. The greater potential use of alternative income producing asset classes, such as renewable energy and infrastructure is also being considered, although the ability to access this asset class in a cost effective, passive manner, requires further investigation. Disclaimer The portfolio is managed on a discretionary basis therefore the investment manager may make changes to the investments held without notice. Investors are agreeing to the investment model as recommended by an Adviser and may not be investing into the specific assets included in this report. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and are not guaranteed, so you may get back less than you invested. If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset. Consideration should be given to whether it is felt that the outcome of any risk assessment is accurate and advice should be sought for factors such as investment objectives, the investment term, attitude to risk, capacity for investment loss and the level of inflation. This illustrative document is intended for investors where advice has been given by Advisers. Models are prepared in accordance with the stated objective and not client circumstances. Information from given sources is taken to be reliable and accurate, which Lowes Investment Management Ltd cannot warrant for accuracy or completeness. Lowes Investment Management is authorised and regulated by the Financial Conduct Authority (192938). Source: FE Analytics, Bid-Bid, Total Return