In a market peppered with interest rate-driven volatility and no shortage of individual company profit warnings, autumn 2023 has been a time to keep calm and carry on.

While we have no crystal ball to tell when central bankers will stop hitting the economy and markets with interest rate rises, we are confident that we are close to being as high as rates will go in this cycle. Of course, they were too late in admitting it, but the chiefs of the Bank of England, Federal Reserve and ECB all echoed each other last week in pointing out that businesses and individuals are feeling the heat of spiking rates. 

Too many column inches are now being given over to the debate as to when and how quickly rates might fall, the point that we have been arguing all year is that the key to restored confidence is visibility that rates will not be moving higher – once this is established, then we have the foundations on which people and companies can pay for their financial future without the current fear of ever rising interest costs. Who would take out a mortgage or raise debt now when conditions are so uncertain? One look at the UK property market will tell you that most people are sitting on their hands.

We are optimistic that increased visibility on monetary policy will underpin improved market conditions and only need to point out how well UK markets have performed in recent days, as a hint of the potential upside in equities. Reflecting this view, the Fund remains effectively fully invested, with a cash balance below 1% at the time of writing. When we have had spare cash thanks to inflows we have put it to work. During October we added to our position in Judges Scientific, the maker of niche scientific instruments, used in universities and research labs across the globe. Judges has been an excellent performer for the Fund to date and we took the opportunity of market weakness to increase our exposure.

Elsewhere, we cheered on the resilience of our UK consumer names, in spite of all the negative headlines that the sector is getting. Greggs saw sales up 20.8% over the last quarter, opening 144 new shops and reporting easing in cost inflation. Young’s will have been as disappointed as the rest of us with the performance of the home nations in the Rugby World Cup, but quietly proud that England battled to the semi-finals, keeping the fans’ Guinness orders flowing deep into the tournament. Meanwhile, JD Sports are wasting no time in pressing ahead with their international expansion, now the number one distributor of Nike athleisure wear in the US. Not bad for an unloved UK consumer business.

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.

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