Portfoliosense®: Inside the Markets – Spring 2023

We take our quarterly look back at markets for the first 3 months of 2023, when stocks rose despite turmoil in the banking sector. The below provides an insight to some of the key drivers and events which occurred in Quarter 1.

Global Equities 


 Global equities recorded a solid gain in Quarter 1 of just over 4%, benefitting from receding recession worries in developed markets. Gains came despite the collapse of Silicon Valley Bank, which caused significant volatility in the banking sector. Should you wish to know more regarding Silicon Valley Bank, we published an article which covered this event in more detail which can be found on our website here.  



 The UK saw a gain of 3.6%. In January, inflation fell to 10.1% however a surprise uplift in February to 10.4% against expectations of 9.7% hit consumer confidence after a strong start to the year. Within the Spring Budget, the Chancellor stated that the Office for Budget Responsibility had predicted inflation will fall to 2.9% by the end of year (as we know predictions are just that), but overall the budget did little to boost market sentiment.  

The latest quarterly GDP data revealed that the UK economy had not contracted in Quarter 4 2022, contrary to expectations. As a result, the UK economy dodged a technical recession by avoiding two consecutive quarters of decline. Although, in its latest quarterly forecasts, the Bank of England said it still expected the country to fall into a recession later in 2023. 

 Any recession, however, is expected be shallower than the Bank of England had been predicting at the time of striking its previous forecasts back in November 2022.   



 In the US, the collapse of Silicon Valley Bank caused stocks to dip sharply in March before recovering to finish the month and quarter in positive territory. We also saw the Federal Reserve raise rates twice, but in contrast to the UK, inflation climbed less than expected in March, leading to speculation that further rate hikes could be limited.  

Europe (ex-UK) 


 Here we saw strong gains in Quarter 1 despite the volatility in the banking sector. In addition to Silicon Valley Bank, we saw troubled lender Credit Suisse being bought by UBS in a deal brokered by the Swiss authorities. Despite this, the financial sector in Europe posted gains for the quarter overall, with Credit Suisse’s problems largely seen as being contained. 

The energy shock stemming from Russia’s invasion of Ukraine is easing and gas prices have fallen. A mild winter also means energy usage has been lower than expected and gas storage levels are relatively high. European inflation continues to drop on the back of a significant fall in energy costs and appears to be past its peak.   

Emerging Markets 


 China’s economy received a boost at the start of the quarter after Beijing loosened its Covid-19 restrictions which had previously constrained the country’s economic growth.  

 However January’s gains were soon retraced as tensions between the US and China increased after the alleged Chinese spy balloon was shot down by the US military. This raised the prospect of further sanctions on China from the US after the ban on selling semiconductors and chip manufacturing equipment to China last year. 

 The best-performing Emerging Market was the Czech Republic. Mexico outperformed against a backdrop of improving economic data while Taiwan and Korea were beneficiaries of optimism about global growth.  

 South Africa lagged the sector along with Poland and Thailand. South Africa continues to suffer from an electricity crisis, whilst the country was also ‘grey-listed’ in February by the Financial Action Task Force given deficiencies in its processes to combat money laundering and terrorist financing.  

Global Value 

Global Small Cap 

Global Property 




 The return for Value may not be as high as anticipated given its relationship with inflation. However, the returns here are impacted more by underlying sectors which Value has a greater exposure to, for example Financials and Healthcare sectors, which both saw negative returns for the period, as opposed to the returns of Value as a whole. Additionally, sectors like technology, which Value isn’t heavily exposed to saw strong returns. 

The Global Property sector saw significant falls amid worries over higher financing costs and weaker occupancy rates. However it continues to offer diversification benefits within the portfolios due to its lack of correlation with global equities.

Global Short-Dated Bonds 

Global Bonds 



 The negative performance for Bonds seen in 2022 can be largely accredited to inflation, which is unfavourable for bond investors due to Bonds inverse relationship with interest rates. However, soft signs that inflation may be peaking may prove more of a tailwind than a headwind in 2023. Fixed-income investors perceived these events as indications that the tightening cycle around the globe may be ending, which many believe were primarily used to combat recessions, and thus anticipated rate reductions this year. As a result, there were broad gains across the asset class, with sovereign debt, corporates, and Emerging Market bonds rebounding from three quarters of losses. 

 Longer Term Returns (Last 5 Years) 

 Portfoliosense® looks to deliver investment returns over the long term, so the below tables look at the returns over the last 5 years (to end of Quarter 1 2023).  

Global Market 



Europe (ex-UK) 

Emerging Markets 






Within the global markets, we can see varying levels of returns, but importantly all markets are in positive territory, and shows why diversification across the global markets is important.  

Global Value 

Global Small Cap 

Global Property 




 The ‘tilt’s’ adopted within our portfolios are also in positive territory for the last 5 years. One area of note here is the return of Global Property and why we do not take short term positions. Given the returns over the first 3 months of 2023, people may question why Global Property is held in the portfolios, however, the 5-year position is a positive return, and whilst being lower than the other markets, the diversification benefits are still key to portfolios.  

Global Short-Dated Bonds 

Global Bonds 



 The bond holdings within the portfolios are neutral or showing a marginal loss over the 5 year period. It is important to remember that we hold bonds to “cushion” portfolios rather than generate returns, however, the above figures are heavily influenced by the losses recorded in 2022, where we saw the unique nature of rising inflation and interest rates. Once again, we feel that was a short-term market position, and the principles of holding Bonds within the portfolios are still valid.  

Investment Risk Warnings 

 Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested.  All investments carry an element of risk which may differ significantly.  

If you are unsure as to the suitability of any particular investment or product, you should seek professional financial advice.   Tax rules may change in the future and taxation will depend on your personal circumstances. Charges may be subject to change in the future.  

For each of the portfolios we recommend we are able to demonstrate, using back tested simulated data, the historic returns, the anticipated future returns (allowing for inflation) and the historic downsides (including the worst-case scenario that would have been experienced had you been invested throughout the data period), over a variety of time periods. 

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