Although markets recovered modestly from August’s decline in September, continued weakness in macroeconomic data and geopolitical newsflow meant the month ’s gains were capped and sentiment remained muted. Nevertheless, we witnessed a significant degree of rotation within equity markets with style factors coming heavily to the fore of market price action. Value and cyclically orientated equites recovered from their heavily oversold levels , whilst growth and defensive equities markedly underperformed as bond yields stepped moderately higher.

At end-September and during the early days of October, there were further signs that the world’s manufacturing sector is now firmly in a recession, with 78% of the global economy now contracting on a purchasing power parity (PPP) basis. The US gauge is even weaker than the rest of the world at 47.8 vs 48.8, respectively, which is perhaps ironic when looking at the performance of relative equity markets YTD. We have also seen signs of spill over into the all-important services side of the economy during the first week of October, with non-manufacturing gauges showing a marked deterioration from recent months.

In summary, we continue to steer the Balanced Fund’s porfolio towards generating an attractive rate of yield and fairly priced growth from across the equity and fixed income sensitivities of the portfolio, garnered from a broad array of global markets from which we consider investments. We are increasingly reliant on certain areas of the fixed income market to embed an attractive yield element to the aggregate portfolio.