Royal London Asset Management

Federal Reserve (Fed) watching was the main focus of markets last week. As expected, there was no interest rate change.

The US economy grew at a slower rate than expected in the first quarter, at an annualised 1.6%. Investors reacted by pushing down yields as they focused on the shortfall. However, two opposing forces drove 10-year yields above 4.7%.

The US labour market showed another strong performance, with non-farm payrolls increasing by over 300,000 in March, building on the February outturn and ahead of the consensus expectation of 215,000.

The University Boat race, dating back to 1829, is a strange sporting event. Competed by the same two universities each year, with crews now drawn from all over the world, it attracts large crowds to the banks of the River Thames in southwest London.

An article on the growth of passive investment caught my attention last week. Despite being an advocate of active management, I can see that there is a role for index investing.

It was not a great week for bond investors as data was generally unhelpful. US February Consumer Price Inflation print came in line with expectations at 0.4% but the core measure was 0.1% above consensus and Bloomberg’s calculation of super-core was higher still at 0.5%, indicating a higher underlying inflation pressure.

UK budgets are not what they used to be. Widely leaked, there were few surprises, enlivened by a bit of ‘Red Wall’ constituency bingo, with call outs for a range of Conservative MPs, and some tax baiting of Labour MPs.

Events at the Post Office have challenged the dictum that there is no such thing as bad publicity.

I remember writing in one of my previous journal entries how cheap our food was. And, despite recent inflation, the British continue to benefit from this – and indeed, take it for granted.

My city career has solely been at Royal London Asset Management but over those 39 years I have seen considerable evolution and development.

Last week, a headline mentioned the increase in use of lunchboxes, with 86 million more taken to work and school than the year before. This was attributed to the cost of living crisis but I think health factors are also contributing.

Markets are feeling more normal, after the holiday lull. The major economic focus was last Friday’s jobs data, where the headline showed an above consensus gain in non-farm payrolls and stronger than expected average hourly earnings.

Bond markets paused for breath in the shortened week. US 10-year yields stayed steady at 3.9% while UK rates nudged higher to end the year just above 3.5% and German 10-year yields closed above 2% after a brief flirtation below. Credit spreads were broadly unchanged – ending 2023 towards their 12-month lows.

There is not a lot to report from the pre-Christmas week. GDP in the UK for Q3 was revised to -0.1% whilst Q2 is now estimated to have been flat. As a result, output is now thought to be 1.4% above its pre-pandemic level in Q4 2019, compared to 1.8% previously.

Last week was active despite the pre-Christmas feel to markets. Government bond markets showed big daily gyrations whilst credit spreads continued to grind tighter. But it was also busy on the communications front – with Ewan McAlpine leading the monthly fixed income Five Point Podcast and Asset TV hosting our Investment Outlook for 2024, which went out last Thursday.

November was a strong month for fixed income despite weakness in the last few days. US treasuries led the way, with 10-year yields falling 60bps, ending the month at 4.3%.

Jeremy Hunt pulled a rabbit out of a hat last week. Despite saying, just a few months ago, that tax cuts were off the agenda, he managed to find fiscal room for two significant moves.

Richard Platt was born around 1670 in Warrington. He was my great (a few times) grandfather. Through looking at county records I have found out that he was a spade maker.