GDIM Investment Market Review & Outlook | April 2023

The last quarter was an eventful one in terms of news, and asset prices were volatile at times but in most cases they ended the period in a similar place to where they began.

Stock markets have been reactive to central bank policy and have factored in interest rates increases, while looking ahead to when they may subside. Bonds also reacted to policy and performed better as the prospect of future rate increases diminished. The relationship between stock and bond prices is usually opposite in terms of movement, but they have recently been moving in the same direction as high interest rates are perceived as negative for both asset classes.

We still foresee a positive path for portfolios this year, as we have seen in the last few weeks, but we feel that there will be further volatility in equity prices before better returns are seen once again. This is evidenced by valuations in stock markets (based on a company’s price relative to its earnings) which are still elevated compared to historic averages. We do not believe that the time is right to increase exposure to our equity holdings just yet. Consumers are still suffering from the effects of higher prices with wages struggling to keep up and we therefore anticipate that non-essential spending will be subdued for the time being. This indicates that more defensive stocks, in terms of the security of their revenues, should perform better and our holdings in utilities, healthcare and infrastructure should remain robust in weaker conditions.

There are more positive signs of growth in many areas, such as China and India, as well as in the sectors benefitting most from the substantial stimulus being enacted by moves toward clean energy infrastructure.

Diversified portfolios have the potential to perform well in both challenging times and when better economic conditions emerge. In the meantime, we hope to continue to provide a less volatile pattern of returns in our Balanced, Conservative and Cautious risk portfolios.

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