MPS May Newsletter

Strategy returns

All strategies delivered positive results this month, especially those with higher risk profiles, and this wasn’t solely due to market timing from the late March rally! Strong stock selection, notably in the US where we made changes within the technology sector, and a significant rebound in emerging markets both positively contributed to performance. 

It wasn’t just equities that performed well in the month, our alternatives strategies also held up, returning around 2-3%, whilst the fixed interest segment was broadly flat over the month given fears surrounding prolonged inflation.

Trading activity

During the month we made several changes under the bonnet of our Building Block funds:

• In the UK, we initiated a new position in Rolls Royce, a leading engineering group supplying essential engines and systems across civil aerospace, defence and power systems. Despite concerns around a slowdown in global air travel and increased jet fuel prices given the Middle East conflict, we saw this as a good entry point to own one of UK’s largest companies and ultimately narrowing the underweight position we’ve held in the past due to lofty valuations. This move was funded by taking some profits from HSBC after a notable rally, as well as from the full exit in our position in safety and equipment manufacturer,Halma.
• Elsewhere, we continued to increase our energy exposures across the UK, North America and Europe following a modest market pullback after initial ceasefire discussions. However, we maintain our stance that oil prices are likely to remain elevated for the foreseeable future.
• Notably in the US, we increased our exposure to tech by topping up our semiconductor holdings, namely Nvidia and Broadcom, and given the recent volatility, these holdings were trading at a slight premium to the broader US market, despite the very attractive earnings growth profile of these companies. To fund this, we exited Marsh & McLennan, reducing our insurance exposure in favour of technology.

Outlook

Progress on peace talks in Iran are positive but there is still a long way to go before we can say the situation is resolved. We retain our original view that it is in the interest of both sides to end the war sooner rather than later; for the Trump administration, the war is more and more damaging the longer it continues.

However, we have seen equity markets wake up to the fact that away from the war, global businesses are still generating strong profit growth, particularly tech names which are growing at a rapid rate and benefitting from ever-expanding investment in AI infrastructure. We think our trading activity in that space last month will help enhance portfolio returns this year, as and when the geo-political noise subsides. In the meantime, it’s about weathering the storm and looking for opportunities that present themselves.

Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. This is a marketing communication and is not independent investment research. Financial Instruments referred to are not subject to a prohibition on dealing ahead of the dissemination marketing communications. Any reference to any securities or instruments is not a personal recommendation and it should not be regarded as a solicitation or an offer to buy or sell any securities or instruments mentioned in it.