Omnis Managed Portfolio Service
May 2024 | Monthly update
Market-moving events
Stubborn and sticky. Inflation has fallen a long way since the post-pandemic high a couple of years ago but is still some way off central bank targets, as we expected. In the UK the annual rate slowed to 3.2% in March and the latest figure for the euro area is 2.4%. In contrast, inflation remains stubborn in the US after rising again in March to 3.5% from 3.2% in February.
Higher for longer. Investors have pushed back their expectations on the timing of interest rate cuts after Federal Reserve chairman Jerome Powell said inflation is taking “longer than expected” to fade. The European Central Bank may be the first to reduce rates, but they are unlikely to fall in the US until much later in the year now.
Geopolitical tensions. Markets have remained relatively unaffected by the conflict in the Middle East but were rattled by the recent increase in tensions. There remains a concern that any further escalation of the conflict risks leading to higher oil prices, a reversal of the recent fall in inflation and a puncturing of the optimistic mood in financial markets.
Investment highlights
Rally of the unloved. Developed markets have outperformed emerging markets recently. At a sector level, utilities, communications and financials have outperformed consumer discretionary, staples, healthcare and technology, reversing a previous trend. Meanwhile, value stocks have enjoyed a resurgence in popularity after a period dominated by growth stocks.
Rate cuts are on the way. Market forecasts for interest rates have now started to fall in line with the expectations of central banks, which have been on a mission to tame investor optimism until the trajectory of inflation became clearer. However, the battle is not yet over and central banks will remain sharply focused on inflation data before making any decisions.
We remain cautiously positioned. We have an overweight allocation to bonds and slight underweight in equities. Although stock markets have rallied, a weaker economy could put pressure on company revenues. Our central case remains falling inflation, a peak in the interest rate cycle and a soft landing, but with a larger than normal risk of a deeper recession.
Omnis Managed Portfolio Service
This document details the changes made to the portfolios within the Omnis Managed Portfolio Service and any investment management changes in the underlying funds over 12 months.
Asset allocation
Take a look at our latest asset allocation in the Omnis Managed Portfolio Service.
Issued by Omnis Investments, which is authorised and regulated by the Financial Conduct Authority. Registered address: Auckland House, Lydiard Fields, Swindon SN5 8UB. This update reflects our view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis Investments is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance should not be considered as a guide to future performance. Approved by Omnis Investments on 2 May 2024.
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