Q4 Market Commentary 2021

We keep a close eye on global market developments, and each quarter we share an overview with our clients to keep you up to date and informed. In Q4 (October to December 2021) the economic backdrop remained relatively stable on the whole with growth being strong in most areas, despite the new variant Omicron creating volatility which started to ease as we found out more about the impact from the scientists. Manufacturing and servicing continue to show expansion, and corporate earnings have seen more upgrades than downgrades as they improve and economies continue to reopen.

Market returns were more mixed due to a wide range of factors the impact of the Omicron variant, rising inflation, potential interest rates and supply chain issues. Finally the direct regulatory clampdown by the Chinese Government within certain sectors unnerved Asian investors.  Inflation concerns have been dominant in the market places this year, with the UK and US in particular.  Central banks have started to tighten the monetary policy with a reduction of additional money (tapering) that has been supporting markets and in the case of the UK a small increase in interest rates. Within other assets, commodity markets have continue to rise in 2021. In particular crude oil and natural gas drove the returns in this asset class as the global economies reopened and increased consumption. At the time of increased consumption global supply issues continued which resulted in upward pricing which also contributed to rising inflation. Turning to the investment outlook in the short-term, we continue to focus on fundamentals and companies with business models suited to adapt to the market conditions. Central banks and governments continue to provide support to their economies and as these economies continue to open, careful analysis on how and the speed of which the support mechanisms are to be withdrawn.

We continue to actively engage with all of our fund managers and within the fixed income asset class, to monitor how they are positioned in the event that fiscal tightening is accelerated ahead of expectation. Many are positioned cautiously in companies that continue to have strong cash flows to meet their debt obligations. We remain overweight in equities favouring active managers, who have been trimming and adding to positions when opportunities arise. We also continue to remain overweight in a pool of diversified real assets, with many having inflation linked contractual payments often backed by governments, which will be useful should inflation continue to rise in the foreseeable future.

Our portfolios remain diversified across each asset class, sector and geography, and our approach has the flexibility to take advantage of the changes in the markets throughout this period.

This information is obtained from sources considered reliable, but its accuracy and completeness is not guaranteed by Anderson Strathern Asset Management Limited. Neither the information nor any opinions expressed constitute financial advice. Investments can fluctuate in price, value and/or income and may return less than the original amount invested. Past performance is not necessarily a guide to future performance. Anderson Strathern Asset Management Limited is authorised and regulated by the Financial Conduct Authority.