The US economy expanded at an annualized rate of only 1.3% in the first quarter of 2024, on the back of slowing consumer spending on both goods and services in response to the high interest rates. By comparison, the British economy grew by 0.6% in the first three months of 2024, ending the recession it entered last year which marks the strongest expansion in over two years. In expenditure terms, household consumption went up 0.2%, led by spending on housing, water and fuels, recreation and culture, restaurants and hotels. Retail sales fell 2.3% between March and April, with fewer purchases in clothing and furniture stores.

Recent US inflation data did not show any “meaningful progress” but it is at least consistent with cooling price growth and leaves the door open for cuts later in the year. In the UK, core inflation at 3.9% was down from 4.2% the previous month.  The picture was much the same in Europe with a 4.9% increase in the pace of labor costs. However, what is evident is that global inflation is coming down from the 2022 peak.

In terms of the international economic outlook, May PMI surveys for the Eurozone and United Kingdom pointed to a continuing recovery for those key European economies. In the UK, the manufacturing PMI rose to the highest level since July 2022, while the services PMI remained in expansion territory for the seventh month in a row.

The stock market declines that were reported in April were for the most part reversed in May.  The S&P500 increased by 4.8% following a 4.2% decline in April as did the NASDAQ, increasing by 6.9% after a 4.4% decline with the MSCI up by 4.2% after being down by 3.9% in the previous month. 

The UK markets continued their positive performance this year with the FTSE 100 up by 1.61% and the broad index, the FTSE 250 up by 3.83%.  The Small Cap Index was up by 4.08%, the AIM All-Share index up by 5.92% and the Fledgling Index up by 3.96%.

With the exception of Impax Asset Management, the Athelney portfolio of stocks performed well during the month with the portfolio value increasing by 3.38%.  Impax is one of our largest positions, declining by 14.7% on the day when the company announced that there had been a material outflow from the BNP Paribas mandate.  This decision by BNP Paribas to withdraw the funds reflects a decision made by them to meet their own business requirements, asset allocation targets or outflows from their distribution network and is in no way is a reflection on the Impax business.  In fact, Impax AUM was up by £2.2bn or 6% during the past six months, reaching £39.6bn on 31 Mar 24 (30 Sep 23: £37.4bn) and exceeding that of two thirds of the London-listed peer group.  We expect that the value of this quality business will once again be reflected in the market price.

After TClarke went ex-dividend, we sold our entire holding into the take-over bid and added to our holding in Liontrust and Paypoint.  The net result was that after accounting for expenses, there was an increase in the Athelney NAV of 2.79% for the month while our cash holding declined slightly to 2.7%.