February is a quiet month for international data but the stats that were released indicated that growth in the US is expected to slow. The new orders component of both the manufacturing and non-manufacturing ISM indices, generally recognised as leading indicators, continuing to decline as they have for the past ten months.  In the UK the PMI surveys have been mixed, with manufacturing showing a slight uptick after declining for several months.  The services PMI was a bright spot in February, increasing more than consensus expectations to 53.3 and is back into expansion range as the sector experienced an increase in business activity and stronger demand. However, in spite of these green shoots, most economists still expect the UK economy to fall into recession and contract in 2023.

By comparison, the Eurozone is likely to perform slightly better, as the region managed to avoid contraction in the last quarter of 2022, and, in February business activity accelerated much faster than expected to a nine-month high. Much of this strength also came from the services sector, where the Eurozone services PMI rose for the second month in a row. All this points to a marginal improvement in Eurozone GDP this year.

After a positive start to the year, the stock markets were under pressure in February with the Nasdaq Composite down by 1.1%, the S&P500 posting a 2.1% decline and the MSCI a 2.5% decline.  In the UK, the large cap segment of the market bucked the trend with the FTSE 100 up by 1.35% over the month while the broader FTSE 250 Index did not perform as well, up by only 0.25%.  Smaller company valuations were under pressure with the AIM All-Share Index declining by 0.97%, the Small Cap Index performing similarly, down by 0.93%.  By comparison, the Athelney portfolio declined by 0.11% during the month and, after providing for expenses, the NAV was down by 1.32%. On a positive note, dividend receipts for the year to date are double that received for the same period last year as well as for 2020 and almost double that received in 2021.

We added to our holding in Smart Metering Systems which reduced our cash holding to 9.3% of the portfolio at month end.