This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
The year so far has seen a modest recovery in equity markets, with the FTSE All-Share Index up 5.8% and the S&P 500 Index up 4.2%, at the time of writing. This has been driven by a rebound in growth, which has outperformed value, using the respective MSCI World indices, by 14%. The US ten-year yield, a major influence on the price of other financial assets, has not actually moved much, falling slightly from 3.7% at the start of January to 3.4% at the start of April. It did rise above 4% in March, as inflationary fears rose, before falling as new data suggested inflation had peaked and a banking crisis made interest rate cuts seem more likely. To us, it is suggestive that growth equities outperformed, even in the earlier part of the period as yields rose. In our view, this may indicate that growth was being bought purely on valuation grounds, even before data suggested lower rates might be nearer, i.e. that this move in growth was not just a macro play. However, this is not the whole story. Looking at the performance of investment trusts and their discounts, we think some interesting features emerge, which may suggest where there is value.
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