December was a positive month for western developed market asset classes. Comments from central bank monetary policy meetings, in particular that of the US, were the key driver of market performance. The latest US Federal Reserve dot plot, a summary of the expectations of committee members, suggested a median outcome of three interest rate cuts in 2024.

UK fixed interest was a strong performer during the period in absolute terms. Although the Bank of England failed to signal the potential for interest rate cuts the market took its lead from the US, with expectations being the UK will eventually need to follow. UK gilts were the strongest performers given the high level of interest rate sensitivity which they have, closely followed by investment grade corporate bonds.

In terms of equities, it was those which are more economically sensitive that performed the strongest. For example, in the UK we saw mid and small companies outperform large, whilst in the US we saw the Russell 2000 outperform the S&P 500. The possibility of interest rate cuts in 2024 increased investor belief that a softer economic landing was now a possibility, potentially no landing at all.

During the month a fund allocation change was made within the fixed income exposure. This saw the holding in Artemis Target Return Bond reduced in favour of Nomura Global Dynamic Bond. This was not a reflection on performance, more the greater level of flexibility which the Nomura fund has in terms of both duration and asset class positioning. This may be more favourable given the latest inflation and interest rate expectations.

The Fund performed in line with the sector average during the month, returning 3.82% and 3.99% respectively.

Further information about the fund can be found on the Fund’s website: MIDSF.com

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance.

The Fund is suitable for investors who are seeking to achieve long term capital growth.

The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.

Past performance is not a guide to future performance.