Advertising Feature Are we reaching peak interest rates? For much of the past year, the big economic story affecting markets has remained the same: inflation is too high, and central banks have been increasing interest rates to try and control it. During this time, the central interest rate in the UK has jumped from 0.1% to 5.25%1, at the time of writing, with US and Eurozone central banks following a similar pattern. Inflation has generally come down since the interest rates have risen, but they remain above the 2% target of most banks. For example, in the UK inflation remained at 6.7% in September2. With inflation coming down, towards the end of the last quarter several Central Bank decision makers from the US, EU and UK began making noises that interest rates might be approaching their high point. This could have implications for fixed income investments. Yields typically fall once Central Banks stop increasing interest rates. If were now reaching so called peak rates, the question is what comes next? Are we looking at a relatively rapid fall back to a low-rate environment, or will they plateau, staying relatively stable for some time? It is a pertinent time to review your current Portfolio to ensure that it is still structured to meet your objectives as the macroeconomic landscape changes. When good news can be bad news Part of the issue central bankers are facing is that the US economy is actually performing quite well. Its GDP grew by over 2% in Q23, and the Federal Reserve Bank of Atlanta has suggested Q3 growth could well be even stronger. Spending remains relatively healthy and, while it has weakened a bit, job data remains positive. The US is expected to achieve the vaunted soft-landing that was hoped. From an investors point of view, this strength means central bankers will feel more comfortable keeping rates higher for longer which is consistent with the messaging were hearing. This expectation has grown as the Quarter has gone on and, in a case of good news being bad news, has been hurting equity performance. This has even dampened the performance of the so called mega tech companies, such as Apple and Nvidia. They really drove equity performance in the first half of the year; however, the picture wasnt quite so straightforward in Q3. The economic picture isnt quite so rosy elsewhere. The German economy remains flat, while the Chinese market continues to struggle on the back of issues in the property market. Meanwhile there was a mixed picture in the UK. At the end of the quarter, the Office for National Statistics reported the UK economy grew as a whole in Q2. On the other hand, we also experienced an unusually rainy July, which put a notable dent in the countrys GDP. Inflationary pressures remain, and Central bankers are also following the higher for longer messaging mantra of their US peers. However, this doesnt mean the quarter was a bust across equities. The FTSE 100 was just about in the green. The FTSE benefited from featuring several large oil companies. Fuel prices have been increasing over the year as OPEC+ nations cut supply. The price of Brent crude finished the quarter at over $96 a barrel, compared to around $75 at the start4. While in many ways we remain in a similar situation to where we were a few months ago with high inflation and rising interest rates, beneath these headlines the situation is changing. The debates around how long rates will need to stay high, climbing fuel prices and the increasing likelihood of a recession in a major European economy continue to develop, and could well play in important role in how investments perform for the remainder of the year. Given the uncertain landscape currently being faced by investors, it is important to take a closer look at your financial assets to ensure that they are working as hard as possible. Asset allocation of your investments is arguably more important now than ever, as we see a more polarised investment landscape. If you would like a no-obligation review of your existing Portfolio, contact lewingtonwealth@sjpp.co.uk. Past performance is not a reliable indicator of future performance. The value of an investment with St. Jamess Place will be directly linked to the performance of the funds selected and the value may therefore fall as well as rise. You may get back less than you invested. The likes of Amazon, Microsoft and even Nvidia this years stock market darling all saw values recede over the course of September 2023. A critical reminder that share prices can move in both directions. This general performance wasnt confined to just tech stocks, however. Both the S&P 500 and the NASDAQ fell over the quarter. Above & Beyond Sources 1 Interest rates and Bank Rate | Bank of England October 2023. 2 CPI ANNUAL RATE 00: ALL ITEMS 2015=100 - Office for National Statistics (ons.gov.uk) October 2023. 3 Gross Domestic Product, Second Quarter 2023 (Second Estimate) and Corporate Profits (Preliminary) September 2023. | U.S. Bureau of Economic Analysis (BEA). 4 Petroleum & Other Liquids: Europe Brent Spot Price FOB - https://www.eia.gov/dnav/pet/hist/RBRTED.htm Accessed - 01/11/2023 [eia.gov] 01793 741246 lewingtonwealth@sjpp.co.uk lewingtonwealth.co.uk THE LOG Win 24 pp10-11 Know your rights.indd 10 2 Watts Barn The Old Dairy, Badbury Swindon, Wiltshire SN4 0EU Lewington Wealth Management Ltd is an Appointed Representative of and represents only St. Jamess Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Groups wealth management products and services, more details of which are set out on the Groups website www.sjp.co.uk/products. SJP Approved 16/11/2023 01/12/2023 14:35