This week’s economic release in the US revised the 4^th quarter GBP growth up from an annualised 3.2% to 3.4%.  This was driven by a substantial increase in non-residential spending which was adjusted upwards to 3.7% from 2.4% as well as the continued strength in consumer spending and more specifically, services outlays. In spite of this solid economic performance, inflation has unexpectedly continued to decline, albeit at a slower pace. This anomaly of declining prices in a buoyant economy has been caused by increased supply following the repair of supply chains and the labour market which suffered material damage during the pandemic. Labour force participation in the economy has recovered but not likely to improve materially from here and the high level of US government debt to GDP is likely to ensure that both short rates and long-term rates, while on the decline, are likely to be higher than previously experienced.

Investors were clearly impressed with the improved US economic figures as the S&P500 continued to power along, up by 3.1% for the month.  The NASDAQ also benefited from the positive sentiment in the equity markets, reporting a 1.79% improvement over the month as did the MSCI which was up by 3.01%. 

In the UK, official statistics published on Thursday confirmed that the economy had slipped into a technical recession in the second half of last year. The Office for National Statistics said GDP fell by 0.3% for the quarter as compared to the last three months of 2023, following a 0.1% fall in the previous period. Undeterred by this, the Bank of England held its policy rate steady at 5.25%.

Notwithstanding the negative economic news, the UK markets performed strongly with the FTSE 100 up by 4.23% and the FTSE 250 up by 4.36%.  Smaller companies did not fare as well, with the Small Cap Index up by 2.10%, the AIM All-Share index up by 0.92% and the Fledgling Index up by only 0.56%.  The Athelney portfolio performed well, up 3.12% during the month and, after allowing for expenses and the payment of the dividend, the NAV reflected a decline of 1.09%.

There were no changes to the portfolio during the month and the payment of the dividend in addition to on-going expenses, caused our cash holding at month end to decline to 2.6% of the portfolio.