Lion Global Dynamic Growth USD Q3 2023 commentary
| Asset classes | Stocks (developed and emerging markets), bonds (investment grade and high yield) and commodities |
| Instruments traded | ETFs and mutual funds |
| Investment style | Bottom-up research and selection of best-in-class ETFs and mutual funds |
| Quarterly return | -3.90% (net of fees) |
| Annualised volatility (since inception) | 9.86% |
Market overview
Global markets experienced a decline during the 3rd quarter of 2023, with the MSCI World index returning -3.8% and the S&P index down 3.7%. This drop was primarily triggered by the Federal Reserve's (Fed) announcement regarding the likelihood of another rate hike in the 4th quarter of 2023, which led to a fall in technology stocks and a negative return of -4.1% for the NASDAQ. Energy prices, on the other hand, continued to rise due to ongoing inflationary pressures. Crude oil prices increased by +28.6%, and the VIX index rose by 26.8% to 17.5, suggesting heightened market stress. Non-farm payrolls stood at 155k, indicating slowing job growth, while real consumption suggested a slight deceleration in consumer spending.
Portfolio performance (net of fees)*
| July | 2.62% |
| August | -2.85% |
| September | -4.45% |
| Since inception (Since Jan 2016) | 57.09% |
Investment performance of the managed portfolio reflected for the period prior to the launch on 25/02/21 is simulated past performance, based on back-tested performance of portfolio components. For more detailed information, see full disclosure in the disclaimer section of the commentary.
Portfolio Allocation (as of 30/09/23)
Outlook
Global growth is expected to slow further, as evidenced by the loss of momentum in the recent Purchasing Managers' Index (PMI) surveys, particularly in the services sector. This reflects the lagged effects of sharp monetary policy tightening over the past year.
In the US, better-than-expected economic data has increased hopes of a soft landing. Consumer spending has been strong, as consumers continue to draw down on their excess savings. However, discretionary spending is expected to soften as the start of student loan repayments hasten the depletion of excess savings. The labour market is also showing signs of weakening, with fewer jobs opening and reduced hiring. In Europe, the latest PMI data points to contraction in both manufacturing and services activities, increasing the risk of a recession. Country-level data suggests private consumption has remained subdued across the bloc. German factories are enduring extended weakness amid poor demand from China, worker shortages, higher interest rates and the lingering fallout from last year’s energy crisis.
In China, after a slew of disappointing data in July 2023, the economy is showing signs of stabilisation, reporting better-than-expected PMI data and credit growth in August 2023. A summer travel boom and a heftier stimulus push has boosted consumer spending and factory output. While the government has beefed up pro-growth measures, including plans to spur more spending on home goods and ease curbs on housing purchases, it is still too early to confirm a sustained recovery trajectory, as the initial spurt of spending activity may moderate, as seen in the past months.
The macro backdrop continues to provide a goldilocks environment for risk assets, as recession concerns are pushed out, central banks are approaching the end of their tightening cycles, and any economic weakness should keep core inflation in check. While valuations are expensive, with risks of further earnings downgrade, the 4th quarter of 2023 is seasonally a strong quarter for equities.