See all the previous BBB Monthly Recaps here.
Oct Performance +0.7% vs FTSE All-Share benchmark +3.0%
Nov Performance +8.4% vs FTSE All-Share benchmark +6.8%
YTD Performance +9.5% vs FTSE All-Share benchmark –1.6%
(Part Time) Fund Manager’s Report
The final stretch. If given the chance to end the 2022 year now, I would take it! +11% on the FTSE All-Share benchmark YTD, improving on the +7% last year if it holds for another month. This is what active investing is all about, isn’t it? Trying to get a decent return above the benchmarks, now that it is so easy to achieve benchmark performance via ETFs and Passive Funds. I think about all the weekday evening hours and the weekends spent on my portfolio, and these types of returns make it worth it.
November saw markets come roaring back, given widespread belief that inflation has now peaked, and markets pricing in peak interest rate curves. Yes, both are important. And we have good signs both are now moving in the right direction. But the more important question is where will inflation fall back to? All the way back to sub 3% like the markets believe, or stubbornly elevated? If UK inflation drops from 10%+ to say 7% and stubbornly stays there, that is no good for shares as the BoE will have to keep raising rates past 7% (my theory) to really stamp it out. And it is when base interest rates get over 5% that real economic damage starts to happen, in my opinion. Whole swathes of investments become untenable, mortgage defaults start to happen (stress tests only assumed c8% interest rates). Right now, the market is fully expecting a peak of c4% BoE rates. I think that is a dangerous assumption. But if high entrenched inflation persists, when will it become apparent? Probably only from middle of 2023. So from now till next summer, I expect the stock market to have a decent party.
I see a potential raft of M&A to come in Q1. This year, many companies focused their strategies on COVID recovery. But now that their houses are in order, growth will be a focus next year, made difficult with a recessionary environment. The easy answer, of course, is to buy growth in. Cash rich large companies with cheap debt facilities will be looking to pick up some bargains, especially leveraged companies churning out healthy EBITDAs, but…
