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10 Jan 2023


December’s market decline saw global equities ending the year down 18% in US dollar terms. Continued hawkish central bank rhetoric on quelling inflation, which has spread to the services sectors, clashed with investor optimism on softer CPI prints. Almost all the global equity sectors were negative in December, with utilities the only exception. Information technology and consumer discretionary led declines as investors pulled out of cyclical sectors more geared to economic growth.

Within developed markets, European bourses outperformed US counterparts as European GDP surprised and on expectations that China’s reopening would benefit the region. US markets were rattled by the persistent Fed hawkishness and poor near-term corporate earnings prospects. While both developed and emerging markets were sharply lower over the year, the latter outperformed in December on a further rebound in Chinese stocks as the country reversed course on its zero-COVID policy.

Developed market bond yields rose as US Fed Chair Powell reminded market participants that a slowing pace of interest rate increases should not be construed as weakened resolve to tackle inflation. The global bonds assets class provided little recompense for the year’s equity market declines, ending the year in similarly negative territory, capping the worst year for stocks and bonds combined in 150 years.

Precious metals including gold and silver continued to rise at a steady clip, simultaneously boosted by US dollar weakness and the (potential) peaking of nominal interest rates. The oil price was little changed as concerns for a global economic slowdown were partially assuaged by China’s belated reopening.

The Foord funds delivered good absolute and relative performance given the resilience of the investment strategies and the China bounce. Indeed, the Foord International Fund delivered positive dollar returns for the year (+2.0%), with astute asset allocation protecting investors against the global equity (-17.7%) and bond (-18.3%) market rout. The Foord Global Equity Fund also outperformed in December and through 2022 has clawed back 400 basis points of 2021 underperformance. The Foord Asia Ex-Japan Fund, while ending the year lower in absolute terms, delivered very strong relative returns in December 2022, outperforming its benchmark index by 14% for the full year.

The funds are well positioned to navigate the market risks and uncertainties that lie ahead. While the peak in inflation has likely passed, it remains to be seen how fast it falls back to target levels with central banks continuing to take a hard line on interest rates. While valuation levels are generally more attractive than they were a year ago, investment risks are still elevated. Prudent portfolio positioning with a safety-first priority remains the appropriate setting for the Foord funds.


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