Global markets have had their worst monthly performance since March 2020 with the MSCI Index declining by 8.77%.  The S&P 500 Index produced its worst first-half performance since 1970, as concerns over heightened inflation and the prospects of a recession continued to weigh on the markets resulting in the index declining by 20.6%. The Dow Jones Industrial Average was also down by over 15% in the first half of the year, while the Nasdaq Composite lost 29.5%.

In the UK, gross domestic product data released this week revealed that GDP growth was 0.8% in the first quarter, in line with expectations, but still down from 1.3% in the fourth quarter of 2021. By comparison, household incomes fell for the fourth quarter in a row, down 0.2% after adjusting for inflation which is the longest successive decline since 1955, with household incomes now down 1.3% year-on-year. On a more positive note, in the US, the core PCE Price Index which is the preferred gauge of inflation used by the Federal Reserve Bank, eased to a six-month low of 4.7% in May 2022, indicating that price increases could be slowing.

The British Pound ended the second quarter at $1.21 and is down by more than 10% in the first half of the year, which is the worst six-month performance since the Brexit referendum in 2016.

The continued Covid lockdowns in China and Russia’s invasion of Ukraine exacerbated market volatility and while our portfolio declined by 7.74% over the month, the decline was not as severe as occurred in the FTSE 250 which declined by 8.58% and the AIM All Share Index which declined by 10.2%.   By comparison, the FTSE 100 declined by only 5.76%, while the Small Cap Index declined by 6.74% with the Fledgling Index down by 5.68% over the same period.

During the month there was a takeover offer for Homeserve into which we sold our entire holding with the intention of using the proceeds to acquire a few new names as soon as market volatility wanes.  Cash comprised 13.0% of the portfolio at month end.