On the economic front, the US economy recorded better than expected growth in the final quarter of 2022, expanding by 2.9% on an annualised basis between September and December. This was a decline from the 3.2% growth reported in the third quarter, reflecting that the steps taken by the US central bank were starting to dampen demand.  US exports fell 1.3% reflecting deteriorating world demand, while imports into the US declined by 4.6% amid the ongoing deterioration in domestic demand for overseas goods. Government outlays registered another solid performance in Q4, up by 3.7%, with gains in both federal and local spending and it is likely that the Federal Reserve will deliver a modest 0.25% interest rate rise at its meeting next week now that inflation appears to have peaked.

UK public sector borrowing more than doubled last month to hit the highest December figure on record, driven up by higher debt interest payments and the government’s measures to help households and businesses with soaring energy prices.  However, a mild European winter has led to declining energy prices and an improvement in household incomes which supported consumer spending in October as well as November. Nevertheless, the risk of the UK slipping into a recession continues to weigh on sentiment after the latest PMI survey showed that UK business economic activity in January fell at its fastest rate in two years amid rising interest rates, strikes and a rising cost of living.  However, as in the US, inflation has shown signs of waning.  Another positive sign for the UK is the continued improvement in the pound, increasing at 1.8% against the US dollar over the month.

Stock markets commenced the year on a positive note with the Nasdaq Composite up by 10.7%, the S&P500 posting an increase of 6.2% and the MSCI up by 7.0%.  In the UK, the broad market did not perform as well as its counterparts with the FTSE 250 Index increasing by 5.3%, the large cap FTSE 100 Index up by 4.3%, the AIM All-Share Index up by 4.4% and the Small Cap Index performing similarly, up by 4.5%.  The Fledgling Index was up by only 3.3%.  By comparison, the Athelney portfolio increased by 4.8% over the month and, after providing for expenses, the NAV was up by 4.6%.

We added to our holding in Treatt which reduced our cash holding to 10.3% of the portfolio at month end.