Royal London Asset Management

I remember writing in one of my previous journal entries how cheap our food was. And, despite recent inflation, the British continue to benefit from this – and indeed, take it for granted.

My city career has solely been at Royal London Asset Management but over those 39 years I have seen considerable evolution and development.

Last week, a headline mentioned the increase in use of lunchboxes, with 86 million more taken to work and school than the year before. This was attributed to the cost of living crisis but I think health factors are also contributing.

Markets are feeling more normal, after the holiday lull. The major economic focus was last Friday’s jobs data, where the headline showed an above consensus gain in non-farm payrolls and stronger than expected average hourly earnings.

Bond markets paused for breath in the shortened week. US 10-year yields stayed steady at 3.9% while UK rates nudged higher to end the year just above 3.5% and German 10-year yields closed above 2% after a brief flirtation below. Credit spreads were broadly unchanged – ending 2023 towards their 12-month lows.

There is not a lot to report from the pre-Christmas week. GDP in the UK for Q3 was revised to -0.1% whilst Q2 is now estimated to have been flat. As a result, output is now thought to be 1.4% above its pre-pandemic level in Q4 2019, compared to 1.8% previously.

Last week was active despite the pre-Christmas feel to markets. Government bond markets showed big daily gyrations whilst credit spreads continued to grind tighter. But it was also busy on the communications front – with Ewan McAlpine leading the monthly fixed income Five Point Podcast and Asset TV hosting our Investment Outlook for 2024, which went out last Thursday.

November was a strong month for fixed income despite weakness in the last few days. US treasuries led the way, with 10-year yields falling 60bps, ending the month at 4.3%.

Jeremy Hunt pulled a rabbit out of a hat last week. Despite saying, just a few months ago, that tax cuts were off the agenda, he managed to find fiscal room for two significant moves.

Richard Platt was born around 1670 in Warrington. He was my great (a few times) grandfather. Through looking at county records I have found out that he was a spade maker.

Recession is an emotive word in the investment industry. Like the bogeyman, an imaginary monster used to frighten children, the word ‘recession’ is used to frighten investors.

Time goes both slowly and quickly. Some days can seem to take an age to pass by, but the years fly by. 

I have missed out on the male grooming boom. For me, a quick trip to my local barber, now and again, suffices. It would appear, however, that men are becoming more conscious of their appearance, with spending on male beauty products up over 70% in a year. Nail care is through the roof with expenditure more than doubling; facial serum (no idea) is up 50%, fake tan by 40% and skincare by 20%.

Events in Israel and Gaza continued to dominated news flow last week. We live in an information age where horrors are immediately transmitted around the world. But at the same time the manipulation of what we see becomes more sophisticated – so we become unsure of reality.

The UK political scene is changing. At a simple level this is shown in opinion polls which indicate a large lead for the Labour Party. It could also be seen in the confidence of electoral success evident at the conferences of the two leading parties.

The distressing events in Israel over the weekend will unsettle markets, with implications for the oil price, US treasury yields and currencies.

As we head into the final quarter of 2023, macro headlines have begun to dominate the market narrative again. Oil prices have risen more than 30% since June and bond yields have risen. This is reigniting the concerns which dominated 2022, of higher energy prices and interest rates impacting economic activity and creating higher inflation.

Bond markets stole the headlines last week. A year on from the Liability-Driven Investment crisis, 30-year UK yields are back to where they were in early October 2022, nudging 5%.