The broad UK market rose this month with the FTSE 250 index increasing by 4.2% and the large cap FTSE 100 Index gaining 2.91% after investors reacted positively to Mr Sunak’s confirmation as the UK’s new Prime Minister. The AIM All-Share Index and the Small Cap Index did not respond in the same way, declining by 0.03% and 0.43% respectively while the Fledgling Index declined by 0.71%.  Long-term bonds, which were at the centre of a chaotic sell-off last month that prompted emergency intervention from the Bank of England, have recovered with the UK 30-year gilt yield at the time of writing at 3.57%. 

The release of the Governments revised fiscal plans has been delayed by more than two weeks to November 17th amid reports that officials are considering bigger spending cuts and tax hikes to fill a massive fiscal hole threatening the country’s economic growth.

Recent manufacturing and services PMI survey data reflected a larger than expected fall in October, with the manufacturing PMI dropping to 45.8 and the services PMI to 47.5. Average prices charged by private sector firms rose, while the index reflecting business expectations for the year ahead, fell by over six points, the largest decline in growth expectations since March 2020. Optimism in both sectors hit a 2.5-year low, negatively affected by political uncertainties, rising interest rates and persistently high inflation. However, in the US, real GDP expanded by an annualized 2.6% during the third quarter even though consumer confidence fell to 102.5 in October.

In an attempt to bring inflation back down to its 2% target, the European Central Bank raised its key interest rate by 75 basis points to 1.75%, bringing borrowing costs to their highest levels since 2009. Conversely, other central bankers have decided to adopt a less harsh approach to interest rate increases as there is evidence that the underlying drivers of inflation are starting to ease.

This resulted in a 7.99% increase in the S&P 500 Index in October, while the Dow Jones Industrial Average increased by a larger amount, up by a notable 13.95%.  The tech heavy Nasdaq Composite was up by a meagre 3.9% all of which led to a 7.11% increase in the MSCI Index over the month

The Athelney portfolio, when compared to the UK indices performed well, up by 4.5% during the month and, after providing for expenses, the NAV reflected an increase of 4.07%.  We made no changes to the portfolio, choosing to sit on the sidelines during this period of extreme political instability with cash comprised 11.6% of the portfolio at month end.