The global macro outlook continues to be dominated by the determination of the US Fed to reduce inflation, although there does now seem to be an end in sight for rate rises and the debate in markets is gradually moving to when we can expect the first cuts. In the UK the public finance data looks better than expected as borrowings are set to be below OBR forecasts due to a lower need for the energy support scheme and a higher tax take. Whether or not this will translate into fiscal support in the forthcoming budget remains to be seen but the ‘mood music’ is not promising in this respect. In the corporate world the results season has started reassuringly with the majority of numbers coming in at least in line with market estimates. Analysts, who tend to err on the side of caution in risk-off markets are generally tweaking numbers a bit lower for this year and next, increased interest charges being one common reason. Interestingly though share prices have held up reasonably well suggesting that the sell off seen last year has led to a wide range of valuations that are supportive of current news flow. The better news for us is that so far dividends have come in slightly ahead of our expectations.
We added two new holdings to the portfolio last month, the property company LondonMetric and Mattioli Woods the wealth manager. We are still actively considering a relatively large number of potential new holdings as we can access our minimum four percent dividend yield requirement across numerous stocks and sectors at the moment. Whilst there was little in common between the underlying activities of our best performing shares over the past month Kitwave, Morgan Sindall and Dunelm all released good results with the latter even announcing a special dividend payment. In difficult markets it is often the case that decent results can provide the catalyst to some positive short term performance as they provide a real time tangible basis for valuation to investors. Another good performer was Wood Group which announced that it had turned down an approach from private equity. On the downside Telecom Plus and Redde both relatively underperformed as did Diversified Energy after an equity issue. We added to our position in Somero and reduced our exposure to a number of holdings including Atalaya Mining, Jupiter Fund Managers and Bloomsbury and we sold out of Tate and Lyle in its entirety on yield grounds.