Global markets finished the year on a weak note, with a hawkish tone from the ECB and Fed, combined with poor sentiment, driving the markets lower in December. A more dovish tone from the Bank of England allowed the UK market to outperform, albeit it still finished down on the month. Whilst job markets continue to be tight, prompting concerns about wage inflation, there are signs of optimism as we enter the new year. Firstly, indications are that inflation has now peaked and is on a downward trajectory. This has allowed the Fed to comment that the pace of monetary tightening will now moderate. Secondly, a milder than expected winter in Europe has seen gas prices fall, easing the inflationary pressure and also reducing the cost of government fiscal support. Thirdly, whilst consumer and business sentiment is weak, there are signs of improvement from recent lows. Looking forward, with economists now expecting relatively short and shallow recessions in the UK and the EU, we expect optimism to return as the market looks through short-term downgrades to a return to economic growth.
The Fund saw a small increase in the unit price in the month. The largest contributors to performance were Foresight Group, which delivered strong H1 results with positive FuM growth and good cost control. LBG Media bounced strongly as they released a pre-close trading update which was better than the market expected, given the tougher backdrop for digital advertising. Finally, CentralNic performed well as they announced they were at least in-line with the top end of expectations and their intention to commence a share buyback. From a negative perspective, Alpha Group International (formerly Alpha FX) gave up some recent gains, Future was softer after analysts reduced forecasts following the announcement of 2023 guidance at the end of November, and Access Intelligence was poor as they saw a slowdown in customer decision making, driving down expectations for FY23 and FY24. From a trading perspective, we used share price weakness to add to Ascential, Auction Tech and Gamma Communications, we received the funds from the Euromoney takeover and we trimmed WanDisco into share price strength.