Market updates

Dillon Lancaster provides an update on the recent events which occurred during Q4 2023, highlighting the volatility in the treasury market which dominated the beginning of the fourth quarter, and the turnaround in November, which saw US inflation fall below expectations and labour data weaken.

After a tumultuous year for fixed income, government bond markets were finally delivering a story of falling inflation in Q4 2023. In our Investment Grade quarterly update, Gordon Shannon reflects on Q4, and in particular the month of December which proved to be one of the strongest months of the year, as hopes of multiple rate cuts in 2024 were accelerated.

There is good reason for fixed income investors to be positive as we move into 2024, although there is also reason to remain cautious. The welcome news is that inflation globally has finally started to fall after remaining stubbornly high for most of 2023.

Douglas Charleston, believes 2024 will continue to provide the carry that has been so welcome, but see market growth and diversity continuing to make European ABS increasingly scalable. 

2023 proved to be a second year where European ABS gave investors the strongest returns in fixed income with the benefit of very low volatility. As risk-free rates grew to what we expect to be the peak, income was maximised whilst the various market pivots on rates came and went in the rear view mirror.

The TwentyFour Advent Calendar is a collection of 24 stats telling the story of fixed income and markets this year. The calendar covers everything from interest-rate rises and record bond issuance to falling house prices and disappearing banks.

While bonds are once again finding their feet, investors have found themselves sitting on cash balances of 30% to 50%. This capital preservation trade has made perfect sense, but does it still make sense as we reach terminal rates?

Charlene Malik, Portfolio Management, outlines the significance of active engagement within the ESG process at TwentyFour, and provides some examples of our recent engagements. 

Johnathan Owen, Portfolio Management, discusses the notable improvements seen in ESG disclosures over the past 24 months, categorising them into three main aspects; environmental, social and governance. 

Gordon Shannon, Partner and Portfolio Management, highlights climate change as one of the main topics which gathers a tremendous amount of attention within ESG investing, discussing the Paris Agreement, lack of data and poor transparency. 

Elena Rinaldi, Portfolio Management, discusses how banks have benefited from many years of ultra-cheap financing from central banks – which is now coming to an end and giving way to a more dedicated capital market funding needs - and touches on what the results of these changes are.

Charlene Malik reflects on a tricky quarter for markets, highlighting the behaviour of the US Federal Reserve, the ECB and the Bank of England. Charlene then discusses the ways in which the MSB team have responded to these Q3 events.