While US GDP growth was steady at 2.1% for the second quarter of 2023, treasury yields climbed higher following recent hawkish comments from the FOMC, a renewed increase in oil prices and a steep decline in US crude stockpiles. The temporary ban by Russia of exports of petrol and diesel to all countries outside a circle of four ex-Soviet states raised further concerns about tight oil supplies. The suspension of Evergrande’s trading in Hong Kong, added to fears of financial contagion throughout China’s property sector and that this would flow into other markets and other sectors of the global economy. These events overshadowed the expectation of an eventual lowering of interest rates, previously believed to be sufficient to maintain the positive momentum in the markets, with the net result that the NASDAQ was down by 5.8% with the S&P500 faring slightly better, declining by only 4.9%. This was also the case globally with the MSCI declining during the month by 4.5%.

In the UK, prices rose less than expected in August with the annual rate of inflation falling to 6.7% even though petrol and diesel prices rose on the back of higher crude oil costs. Core inflation, excluding food, energy, alcohol and tobacco, was 6.2%, down sharply from 6.9% in the previous month. Gilt yields and Sterling declined after the data release and while the Bank of England (BoE) held their policy rate at 5.25%, they did leave the door open to a further tightening.

Recent strong GDP figures indicated that the UK economy grew by 0.2% in the second quarter of 2023 with the year-on-year data up by 0.6%. This improvement was reflected in the performance of the larger companies with the FTSE100 up by 2.3% while the remainder of the market and in particular, the mid-cap companies did not perform quite as well. The FTSE 250 declined by 1.8%, dragged down by the mid-cap stocks with the AIM All-Share Index declining by 2.2%. The Small Cap Index was up by 0.2% and the Fledgling Index performed slightly better, up by 0.4%. In spite of a substantial increase in the income received by way of dividends, the Athelney portfolio declined by 2.3% during the month and, after paying an interim dividend of 2.2p, the NAV reflected a decline of 3.3%.
There were no changes to the portfolio during the month and we utilised some of our cash on hand to pay the interim dividend to shareholders. Our cash holding at month end comprised 3.2% of the portfolio.