In spite of the fact that the US FOMC left monetary policy unchanged at its January meeting with the federal funds rate maintained at near zero, there was a 37bp selloff in 10-year US Treasuries towards the end of this month which caught traders both locally and abroad by surprise with its speed and magnitude.  This selloff in the US bond market prompted by renewed inflationary fears flowed through to the UK and elsewhere, affecting the high PE and growth sectors of the equities market, especially the tech sector, while cyclicals remained in favour.   The result was that while the S&P 500 was up by 2.6%, the tech heavy NASDAQ was only up 0.9%, while the MSCI increased by 3.7% during the month, driven up by other markets including France where the CAC was up by 5.9% and Germany where the DAX up by 2.6%

Data released this month showed that the UK consumer continued to face significant headwinds amid elevated COVID cases and government restrictions. Retail sales declined by 8.2% in January and the contraction was even higher at 8.8% when gasoline sales were excluded. In spite of this poor economic data, the FTSE 250 Index was up by 3.37% over the month with the FTSE100 up by only 1.19%.  The small cap stocks again performed better than large cap stocks with the Small Cap Index increasing by 3.96% and the Fledgling Index up by 3.17% while the AIM All Share Index increased by 1.95% during the month.

Our portfolio underperformed the various market indices during the month, declining by 0.95% as the moves in bond yields affected the market valuation of the growth stocks in the portfolio. However, we still see this as rotational with the future portfolio value driven by a growth in earnings should business expansions continue as expected.  After allowing for expenses, the NAV declined by 1.17% over the month.

During the month we top sliced our position in Games Workshop and sold our holding in Churchill China and Belvoir while adding to our position in LXI Reit and Target Healthcare to take advantage of their dividend yields and business outlook.   As a result, our cash increased and comprises 7.8% of the portfolio at month end.