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The Last 13 Months
Matthew Seaward
 on 
February 28, 2024
Investment

Why it’s Important to Stay Invested!

It comes as little surprise that, over the long term, equities outperform bonds, and that bonds outperform cash. So, why is it so challenging to make the decision to invest? Uncertainty, volatility, and psychological biases all prevent investors, even those more willing to take risks, from making the leap and entering the market. 

Whilst many clients were comparing the positive cash returns last year to investment returns, over the last 13 months our PRISM H5 balanced strategy returned 6.7%whilst UK base rates returned 5.2% and to achieve a return close to UK base rates at the Bank clients would need to lock it away – typically for 12 months or more.

In the picture below we review how markets performed over the last 13 months and summarise the key events.

Disclaimer: The views, thoughts and opinions expressed within the article / video are those of the author / speaker(s) and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any productor security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. CIG, its clients and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute our views as of this date and are subject to change.

Regulated investment activities are carried out on behalf of Capital International Group by its licensed member companies. Capital International Limited and Capital Financial Markets Limited are licensed by the Isle of Man Financial Services Authority. Capital International Limited is a member of the London Stock Exchange. CILSA Investments (Pty) Ltd (FSP No. 44894) trading as Capital International SA, is licenced by the Financial Sector Conduct Authority in South Africa. All subsidiary companies across both jurisdictions are represented under the Capital International Group brand.

The prospect of a steeper yield curve next year is becoming a focal point in financial discussions. 2023 marks the first time in a decade that the yield curve has remained inverted for the entire year, with this trend starting in July 2022. An inverted yield curve is traditionally seen as a sign of an impending recession and typically, the curve tends to steepen as a recession starts.  

Throughout 2023, the market experienced an inverted yield curve in the 2-10 spread, starting and ending around -0.5%. The inversion deepened beyond -1% at times, notably in March and June last year.

Chart 1: Spread between 10-year and three-month US treasuries

Source: Oxford Economics

Recession or a Slowdown?

Strategists predicted a recession last year but ultimately ended up being wrong with both the economy and the consumer proving resilient.

The job market is currently undergoing a rebalancing process and whilst the expansion of job growth has slowed, this trend is not causing much concern. The number of job openings remains higher than the levels observed in 2019 across almost every industry, indicating that labour demand remains robust and hasn't drastically declined. One explanation for the higher number of openings is more focused hiring in certain industries, such as healthcare, hospitality, and government. This has resulted in a larger-than-average increase in wages that has helped to attract new labour easing supply constraints.

The chart below highlights the number of job openings vs. the number of unemployed in the US economy. Anything above 1 implies more jobs than unemployed to fill them.  

Source: U.S Bureau of Labor Statistics

Prior to the January jobs report, there was an indication that the labour market was beginning to loosen, evidenced by a decrease in both the quit rate and wage growth. Nonetheless, the robust job gains in January contributed to the soft-landing thesis. Presently, there are still more job openings than unemployed people looking for work and, despite the January jobs report, we do believe the ratio is likely to move towards equilibrium by the middle of the year.

The ‘Sahm Rule’ derives one of its variables from labour and is a popular new Federal Reserve indicator designed to signal the onset of recession when the unemployment rate increases by 0.5% relative to its 12 month low. The rate had been showing an upward trajectory leading some strategists to call a recession. This trend, however, was promptly reversed following the release of the January job figures.

Source: Oxford Economics / Haver Analytics

This all leads this economic environment to be particularly difficult to forecast. US labour shortages coupled with earnings being largely positive vs, consensus gives a compelling case for remaining invested in equity markets.

Why the slowdown?

Going into 2024, I see three key tailwinds diminishing: reduced fiscal spending, a strong consumer base, and China's reopening, all of which contributed positively in 2023. For the first time, US debt sustainability has become a focal point among American politicians. Vivek Ramaswamy, for example, has tried, albeit unsuccessfully, to campaign for the presidency with a mandate centred on reducing the national debt.

US Debt Sustainability

US Treasuries are offering more attractive yields than in the past five years, leading to a shift away from the mantra around “TINA” or “there is no alternative”, which refers to equity markets being the only place where investors can make money. This change is drawing more Americans to treasuries, a trend we saw highlighted in the Wall Street Journal headline “Stock bull markets helped make boomers rich. High bond yields are helping them retire.”

https://www.wsj.com/personal-finance/retirement/income-investing-bonds-dividend-stocks-01a97372

The interest in US treasuries, by the American public is fortuitus for the Fed, given demand from international buyers has waned. Both China and Japan have both cut their holdings on aggregate of almost $3 trillion in 2013 to under $2 trillion today.

Source: Data from Bloomberg

Higher interest rates have raised concerns about debt sustainability, as they are higher than those seen in the previous market cycle. Additionally, the expected large issuance of treasury bonds and Quantitative Tightening (QT) could potentially create a supply imbalance, further questioning the sustainability of debt.

However, we remain less worried about higher rates and are more concerned about higher debt levels coming from larger deficits. Which could be dangerous for the public debt path, particularly in the US where the debt to GDP ratio is expected to diverge from Europe.

The “Growth in a Time of Debt” paper by Reinhart and Rogoff indicated a relationship between slower GDP growth when national debt to GDP was above 90%. Whilst this theory has since been debunked, the question remains as to whether governments can get away with pseudo Modern Monetary Theory when other governments are remaining fiscally disciplined.

In 2023, the US saw public debt interest repayments hit $1.3 trillion, or 4.6% of its GDP, a figure that is expected to rise, even with the possibility of interest rate cuts later this year. Oxford Economics projections indicate that the budget deficit may increase to 10% of GDP by 2050.

In addition to continued deficits, Oxford Economics draw two conclusions. Firstly, the impact of higher rates may be less severe than anticipated even if 10-year government yields remain elevated. Secondly, the more significant impact is more likely to be felt through budget deficits. A permanent 1% GDP increase in budgetary spending would likely raise debt to GDP by 30% by 2050, which on their debt path projector looks likely to reach 220%.

Unlike the US the debt paths in most major European economies looks more favourable, thanks to generally lower long-term rates as well as smaller budget deficits. As forecasted in the below chart, compared with the US, Europe’s major economies will move towards lower deficit and debt levels.

Source: Oxford Economics/Haver Analytics. From: Global: Advanced economy public debt is sustainable after all.

The main reason for this difference is the tax revenue as a percentage of GDP is significantly lower in the US than many other European countries.

Tax-to-GDP ratios, 2021 and 2022p (% of GDP)

Source: Revenue Statistics 2023, https://oe.cd/revenue-statistics

Note: Preliminary data for 2022 were not available for Australia and Japan.

With upcoming Presidential elections, there's high uncertainty impacting the US’ fiscal outlook and potential trade tensions. Recent 30-year Treasury auctions have yielded disappointing results, suggesting potential concerns over the sustained interest in long-term bonds, or perhaps highlighting the risks associated with the current market inversion. The main bidder for Treasuries has traditionally been from US domestic investment funds, yet their demand has failed to maintain momentum since last August.

Fed rate cuts but higher yields on longer dated treasuries.

While term premia (TP) has repriced sharply over recent months in line with our forecasts and trade recommendations, we see moderate further upside for several reasons. Firstly, measures of TP remain low relative to history and fundamentals. Secondly, upside inflation risks are higher than pre-Covid and, with inflation still above the Fed’s target, bonds should for some time remain a poor hedge for equities and other risk assets. Thirdly, and perhaps most importantly, domestic and global supply dynamics, which we have highlighted above, are supportive of higher premia, with large US fiscal deficits and ongoing balance sheet runoff or QT in both the US and other advanced economies.

This has led our team to see value in both the shorter end of the curve but also floating rate notes, given our expectations for rate cuts are both further out and so much less than what is presently priced in or expected by the market.

Disclaimer: The views, thoughts and opinions expressed within the article / video are those of the author / speaker(s) and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. CIG, its clients and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute our views as of this date and are subject to change.

Regulated investment activities are carried out on behalf of Capital International Group by its licensed member companies. Capital International Limited and Capital Financial Markets Limited are licensed by the Isle of Man Financial Services Authority. Capital International Limited is a member of the London Stock Exchange. CILSA Investments (PTY) Ltd (FSP No. 44894) and CILSA Solutions (PTY) Ltd (FSP No. 6650), t/a Capital International SA are licensed by the Financial Sector Conduct Authority in South Africa. All subsidiary companies across both jurisdictions are represented under the Capital International Group brand.

Welcome to the Quarterly Investment Review for Q4 2023.

Our Investment team have put together a range of resources to update you on what has happened in markets across the fourth quarter of 2023. Here you will find: 

  • High-level, global equity performance analysis
  • Interviews with our team of investment experts
  • An introduction to our brand new podcast 'Capital Alchemy' featuring guest speaker Kobus Kleyn CFP
  • A written summary covering the quarter's main market events

Global Equity Performance Analysis:

The graph below shows global equity performance across the quarter and plots world events along the performance line to indicate their impact on markets.

Hear from our team: 

2023 Summary and Outlook


Industrial Equities



New Podcast: Capital Alchemy

Soon to be released across various listening platforms, 'Capital Alchemy' is a brand new, interview style podcast featuring big names from across the financial services industry. Why Alchemy? The podcast aims to bring together leading minds and experts, creating a vibrant concoction of ideas, thoughts and points of view. Whilst the subject matter might sometimes be complex, Capital Alchemy’s laid back format makes it perfect to have bubbling away in the background of your dog walk, your kitchen clean up or your gym session. In the first episode, we were delighted to have Capital International's Tatenda Chikombero and Lerato Lebitsa host Certified Financial Planner, Kobus Kleyn. Watch the teaser below and keep an eye on our social media channels for the podcast's official release.


*Update - Capital Alchemy has now been released! Listen to the first episode here or on your preferred streaming platform.


Q4 Summary and Outlook

The final quarter of 2023 provided welcome relief to investors as major stock indices and global bond markets posted their best returns of the year. This rise in asset prices reflected inflation numbers which fell more quickly than expected; this surprised the market and gave support to the view that central banks have reached the peak of the interest rate cycle.

The S&P 500, NASDAQ 100, and MSCI Europe achieved returns of 11.7%, 14.6%, and 6.5% respectively in local currency terms while the UK main index returned a modest 2.3%. The combination of lower bond yields, healthy corporate earnings, and falling inflation all helped provide support for a broad equity market rally. Growth stocks, especially those in the technology sector, and those that continue to participate in the artificial intelligence trend, outperformed value stocks. Third quarter earnings season in the US concluded with 80% of S&P 500 constituents beating earnings estimates by circa 8% on an average. The global equity rally was welcome but did highlight an issue that 2023 has been a year of poor market breadth as year-to-date US equity returns have been largely driven by the outsized returns of the Magnificent Seven, which combined on an equal weighted basis are up 111% YTD. Nvidia being a major player in AI innovation was the top performer of the 7 achieving a 240% return YTD. UK valuations, which have not become as stretched as US valuations, continue to be viewed as comparatively cheap.

Global government bonds rallied as yields rapidly declined after hitting their peaks in October. The US 10-year Treasury yield, which hit 5% in October, now sits at 3.9%. The UK and EU 10-year Treasury yields sit at 3.5% and 2.0% respectively. The “higher for longer” central bank narrative has been replaced by “lower and sooner” with interest rate cuts now expected to begin as early as Q2 2024. The pivot to a more dovish stance has occurred much faster than initially forecasted. Markets have interpreted the surprise disinflation readings to imply a similarly expedited cycle of interest rate cuts following the sharp cycle of interest rate rises. Renewed hopes of a soft landing gave support to investment grade and high yield bonds as credit spreads tightened.

In terms of macroeconomic figures, the surprise fall in headline inflation brought the most recent readings to 3.1% in the US, 2.4% in the EU, and 3.9% in the UK. On October 7th news broke of terrorist attack on Israel by Hamas, which sent shockwaves throughout the world and caused the volatility of commodity prices to spike. Brent crude oil prices reached a peak in October of $91, falling to $77 by year end. Gold finished the year rallying 11.6% to $2063. The current positive correlation between stocks and bonds is a useful reminder of the importance of diversifying through alternative assets such as commodities and real estate to hedge against other risks.

Throughout 2023, financial markets have contended with a formidable amount of volatility and uncertainty, but with greater clarity we can now refocus on key dynamic variables like the peaking and unwinding of the interest rate cycle and disinflation. An end to the interest rate cycle brings a sense of stabilisation to markets and forward interest rate expectations. Politically, 2024 is also an eventful year with elections in the US, EU, and UK.

Having avoided a much-feared recession over winter, and with the potential easing of interest rate pressures, consumers may become more confident, especially if inflation continues to decline and stay below 3.0% in 2024. The difficulty will be managing market optimism with the actual level of interest rate unwinding and to prevent valuation bubbles. Global economies must also contest with potential recession, especially in the UK where GDP fell -0.1% in Q3, while the US must contend with the burden of $34 trillion in national debt. Heading into 2024, we remain vigilant on the macroeconomic and geopolitical hurdles that need to be navigated while weighing potential opportunities against potential risks. In this environment we prefer resilient high-quality companies with strong balance sheets, good cash flows, and competitive pricing power.

Disclaimer: The views, thoughts and opinions expressed within the article / video are those of the author / speaker(s) and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. CIG, its clients and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute our views as of this date and are subject to change.

In the months ahead UK politics will be dominated by relentless speculation as to the date of the forthcoming General Election. The quaint - or even 'working' - assumption underpinning such feverish chatter is that a sitting Prime Minister has absolute control over this fateful decision.

Rishi Sunak faces a predicament familiar to any Prime Minister trailing in the opinion polls as we enter the fifth and final year of the current parliament. Go early (in May) or wait in the hope that your electoral prospects will have markedly improved by the autumn? For what it's worth, I believe the Conservatives’ best chance of mitigating the extent of their losses will come in the spring, but I am almost certain that Sunak will wait until October or even November in what may be forlorn hope that 'something will turn up'.  

Amidst all the political and economic turbulence of 2023 one thing has been uncannily consistent - the Opposition Labour Party's twenty percentage point opinion poll lead. Unless this changes few would blame Sunak for hanging on doggedly until the autumn. Yet even a sharp narrowing of Labour's poll lead in the early months of the New Year would probably tempt the PM to run it long in the hope that this favourable momentum might continue.

The one contrast is that last year began with Sunak's personal ratings comfortably outstripping the Conservative Party's. It ended with his polling numbers having plunged to levels that compare unfavourably even with his two immediate predecessors at the point they were ousted from the leadership. Whilst it would be unwise entirely to rule out yet another leadership challenge from disaffected and panicking Tory MPs, the general mood is less revolutionary, more one of fatalism. A flood of further retirements from parliamentary foot soldiers will likely be announced in the weeks and months ahead as the unpalatable prospect of Opposition or, worse still, personal defeat at the hands of the voters beckons.  

So, what does history teach us about election outcomes when governments cling on to the bitter end? The record is a little more mixed than one might assume. Events can sometimes work in favour of the incumbent administration with most politicians understandably reluctant to forgo a final year in office if the long shadow of defeat hangs over them. In the 1990s the then Conservative PM, John Major, twice waited until virtually the last possible moment to 'go to the country'. In 1992 he confounded most commentators and all opinion pollsters by winning a narrow victory. Paradoxically, delaying that election in the (as it turned out) erroneous expectation that the prolonged economic recession would have come to an end by polling day probably worked in his favour as it heightened voters' doubts about the Opposition's economic alternative. Five years later clinging on until the last moment during far more clement economic weather served only to magnify the governing party's divisions (over European policy naturally) and establish ever more firmly the credibility and reliability of Tony Blair's New Labour Party. The landslide defeat that followed was the Conservatives' worst result since the 1830s.  

At each of the six General Elections since that 1997 calamity the Conservative Party has increased its vote share (a feat unparalleled in UK politics in the era of universal suffrage). At the last election it won twenty-four seats that had been Labour strongholds since the Second World War or even earlier (the so-called Red Wall). For a time, it seemed that the 2019 General Election might join 1945 and 1979 as turning point contests; more likely political historians will see it as a flash in the pan after which normal service was quickly resumed. The coalition that Boris Johnson's carved out of Brexit voters in the former industrial heartlands of England and northern half of Wales and affluent market-towns of the Midlands and South has simply proved too broad an alliance to hold together.

The last time a sitting government went into opposition was in May 2010. Gordon Brown's Labour Party had little choice but to run down the clock to the latest possible day in the aftermath of the financial crisis. As the economy bounced back from a fearful recession-cum-depression during 2009, the Treasury was able to prime the pump by unprecedented borrowing and VAT cuts. As a result, the opinion poll gap narrowed sharply in the months before that election; although the government lost office, the margin of its defeat was conventional rather than the rout that had seemed on the cards only months before.  

The risk facing any third or fourth term administration is that the longer it waits to call an election, the more irresistible becomes the argument that it is 'time for a change'. Voters stand ready to punish severely any government that blatantly overstays its welcome, especially where there is little tangible evidence of progress. Clinging on for its own sake is never a good look.

So, election timing will also be dictated by the success or otherwise that a government has in framing the narrative about the contest that lies ahead. It seems to me that there are clear parallels today with what turned out to be the long campaign of 1996-97. Then the incumbent Tories seemed unable to make up their mind whether to attack Tony Blair on the basis that he constantly changed his policy positions for expediency - or alternatively as a Trojan Horse to hard-left radical politics. Almost three decades on they appear to face a near identical dilemma in handling Sir Keir Starmer and his prospective government.

Options are evidently being kept open... for a while at least. National Insurance reductions announced in November's Treasury statement will take effect with almost indecent haste from early January, rather than at the beginning of the next tax year in April. The relatively early timing of the forthcoming budget for the first week in March is a further signal that a May election has not been entirely ruled out at this stage. This would also align national and local elections, probably enhancing the Tories performance in the latter and ensuring that the party's already depleted activist base is out working for victory.

Which brings us to the government's biggest and most intractable political headache as election year commences. The fact is that in the eyes of many Conservative Party members both the leadership and the parliamentary party as a whole lack legitimacy. As they see it, twice in the past four or so years, the Tory MPs have unilaterally overturned the membership's verdict in its single most important prerogative, namely electing the party leader. First in removing Boris Johnson, who was supported by two-thirds of the membership and within months of being anointed Prime Minister proceeded to win a once-in-a generation near landslide majority at the 2019 election. After his Tory parliamentary colleagues had unceremoniously ousted him, the membership voted in Liz Truss. To their dismay her premiership was terminated within seven weeks by the same MPs who then collectively installed Rishi Sunak (whose leadership claims had been specifically rejected by the grassroots after an exhaustive set of hustings) without even consulting the membership at large.

The simmering anger of Tory Party members has manifested itself in several ways. First, over candidate selection. One relatively little reported development has been the clear trend in 'safe' seats (those likely to be won even in a very challenging election) for local councillors and party activists to be selected in preference to the national list of candidates and Westminster-based special advisers and insiders. The presumption is that in future such MPs will be more aligned to grassroots opinion and willing to do the local membership's bidding. More worrying still for the leadership is the renewed threat that arises from the Reform Party and a resurgent Nigel Farage.  Anecdotally I understand that vast numbers of Tory Party members, especially those living beyond London and the House Counties, have already made it clear that they will support Reform candidates whose simplistic policy prescriptions on immigration, tax cuts and the defence of the realm are at odds with the Conservative government's actions in a cash-strapped world restricted by obedience to international treaties.  

Small wonder Rishi Sunak - like John Major before him - has been reduced to pleading with his parliamentary foot-soldiers to 'Unite or die'. It may be a cliche, but the electorate tends not to vote for divided parties; meanwhile in order to counter the threat from the Reform Party, each MP and candidate becomes tempted to stand on their own personal manifesto on the assumption that this will help them save their own skin. Expect to see much more of the faintly ridiculous self-important postering by faction leaders on both wings of the party that we saw late last year over Rwanda and migration policy.

The Sunak/Hunt partnership deserves more credit than it has received for stabilising the economic situation. They continue to be plagued by perennially pessimistic official forecasting and I suspect the out-turn in 2024 will be better than currently predicted. Nevertheless, economic growth will in all likelihood remain anaemic; interest rates will almost certainly come down a little and inflation will be further squeezed. However, the cost-of-living crisis will still impact many - especially those homeowners whose fixed-term mortgages are up for renewal. Few can confidently predict that international conflict will not also continue to adversely affect energy and transportation costs.  

Labour's strongest card will evidently be to ask relentlessly: 'Are you better off now than you were five...or fourteen...years ago?' In short, the economic outlook may not be appreciably better in the autumn than it is now.

One other factor that may prove influential in election timing is the US Presidential contest. Sensibly perhaps the Founding Fathers established fixed term elections, but the fact that the US goes to the polls on 5 November may have some bearing on election strategy here.  Not since 1964 have UK and US elections taken place within the same month; personalities aside (and I am not convinced that both or even either of the two current front-runners for the main party nominations in America will necessarily end up fighting the election) the biggest warning from the other side of the Atlantic is that even robust economic recovery since the pandemic has done little to boost President Biden's polling numbers. Perhaps the lasting impact of Covid has been to irreparably jolt voters' confidence in incumbent governments across the democratic world.

In a year when the world's largest democracy (India) and its largest trans-national bloc (the European Parliament) also go to the polls there is one New Year political prediction that can already be made with absolute certainty - 2024 will not be dull!

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit.

We recently had the pleasure of attending SiGMA Malta where we had the chance to meet with some of the most prominent players in the eGaming field.  

Capital International Bank (CIB) has long been supportive of an industry which plays such a critical part in the Isle of Man’s economic ecosystem and this trip was further reaffirmation of our commitment to providing banking services to gaming operators and the wider industry.

Attending the final eGaming show of the year was a great experience with SiGMA Malta proving to be a huge hit for everyone in attendance. It was fantastic to meet up with some familiar faces and to receive some excellent feedback on the banking services we provide to the industry.  

It was also brilliant to see so many organisations with an Isle of Man connection, ranging from Digital IOM and the Isle of Man Gambling Supervision Commission, through to various Corporate Service Providers and licensing specialists.

SiGMA Malta also presented a huge opportunity to meet first class operators, software providers and industry experts, allowing us to understand the latest industry trends, whilst also showcasing CIB’s proposition to prospective clients.

Image Sourced From SiGMA World LinkedIn

During these conversations, one theme arose time and time again: the challenge of obtaining genuine banking for businesses in the industry.

We know that the process of opening a corporate bank account is typically protracted, operationally intensive and sometimes exasperating for corporate clients.  

We have identified several common issues that clients often encounter:

  • Difficulty in finding a regulated bank that offers a suitable corporate banking solution. Operators are often forced to deal with Electronic Money Institutions (EMIs) - EMIs are not required to operate to the same capital, liquidity and market risk regulations that apply to licensed banks and can be a risky alternative solution to a real bank.
  • ‘The Slow No’ - The task of completing extensive paperwork, waiting months for a response, only to face rejection.  
  • An account opening process that takes weeks or even months.
  • Dealing with outdated and cumbersome banking technology.

Simply put, Capital International Bank has been designed to alleviate these issues.  

First of all, we are a regulated bank holding a Class 1 (2) licence under the Isle of Man’s Alternative Banking Regime. This  enables operators to obtain banking with a licensed bank as part of their own license conditions. Furthermore, we are subject to the full range of prudential regulation regarding capital, liquidity and market risk requirements that come with holding a banking license. This differentiates us from money transmission license holders who are not subject to the same requirements.

We also offer quick decision-making from our team headquartered in the Isle of Man and will let you know whether you are eligible for a bank account within just 24 hours. New accounts are then opened relatively quickly, not taking months like most other banks, avoiding the dreaded ‘slow no’ and protracted account opening process.

Once onboarded, our clients are then able to access our bespoke, purpose-built digital banking platform and our suite of interest-bearing solutions, including same-day access fiduciary accounts with competitive rates of interest.

Please note: Currently, we cannot accept direct player deposits or provide accounts for gaming operators in USD or crypto currencies directly. However, we have a money market fund solution for USD segregated player funds in the wider Capital International Group, which has been approved by the IOM GSC.

If you would like to know more, please do not hesitate to reach out to us at cib-bd@capital-iom.com

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

Capital International Bank Limited is a wholly owned subsidiary of Capital International Group Limited (www.capital-iom.com) a privately owned financial services group based in the Isle of Man. Capital International Bank Limited is licensed by the Isle of Man Financial Services Authority and operates as a non-retail, restricted deposit taker under a Class 1 (2) licence. Deposits are not covered by the Isle of Man Depositors’ Compensation Scheme and terms and conditions apply.  Capital International Bank is the trading name of Capital International Bank Limited. Capital International Bank Limited is also licensed by the South African Reserve Bank Prudential Authority to conduct the business of a Representative Office in South Africa.

After saying our Goodbyes to the children and staff at the Orphanage, a few of us (Werner Alberts, Jamie Wade, Karen Le Moal, Leanne and John Venables) decided it would be a good idea to climb Kilimanjaro!

We also had Mike, a family friend of Werner’s join us for the Trek. Mike and his Mum had always dreamt of climbing Kilimanjaro together but sadly she passed away following a short illness a few months earlier.  When Mike heard about our trip, he asked if he could join us and of course we were more than happy to help him follow a dream in his Mum’s memory.

Kilimanjaro is the highest mountain in Africa and the highest free-standing mountain above sea level in the world, standing at 5895m (19,340ft).

With high expectations, Werner enrolled us all on the shorter 5-day Marangu Route (Coca Cola route) which had the lowest success rate of them all at just 50%. On the plus side though, this route unlike the others, had wooden style dormitory huts to sleep in rather than camping.

Day 1 - We were picked up from the hotel on Monday morning where we were greeted by our guides and a bus full of porters. The Porters would be carrying our bags, all the food, water, cooking equipment and their own items all the way to the top base camp.

We had a 2-hour journey to Marangu Gate and it was amazing to see how the landscape changed from dry dusty roads and fields to lush green tropical plants and farms.

On arrival at the gate we were gifted with a delightful lunch box (we were now sick of these things) and once all the paperwork was sorted by our guide, we began our accent. We were walking approximately 5 miles heading for Mandara Hut which sits at 2700m high.

The walk was beautiful and we all felt it was like walking through Ballaglass Glen but with the addition of Monkeys.

Day 2 - Todays walk was around 7 miles and we were headed for the Horombo Hut which sat at 3720m. The landscape changed quite quickly once we set off from Rainforest to Moorland.

They even had fibre broadband all the way to Kibo Hut!

Day 3 - Today we walked around 6 miles to Kibo Hut at an altitude of 4700 meters.

The landscape was now alpine desert and it started to feel colder. Our guides would often quote the words “Pole Pole” which translates to ‘Slowly Slowly’. Going slowly allows your body more time to acclimatize to the higher altitude and lack of oxygen.

We arrived at Kibo in time for a late lunch and tried to get some sleep before leaving for the summit at midnight.

Day 4 - After trying unsuccessfully to get some sleep (excluding Karen who seemed to be able to sleep at any given point), we ate (excluding Leanne who didn’t seem to be able to eat at any given point) and set off at midnight to the summit.

We began walking very, very slowly in the pitch black with only our headtorches to light up the feet of the person in font. Altitude sickness had now set in with us all feeling some or all of the affects such as headaches, sickness, dizziness and low energy. Oxygen levels at this altitude are down to around 40% of that found at sea level making it feel like you are only working on one lung. You have no choice but to shuffle along, pole pole!  

Hours passed by and every time you looked up you could just see lights from other walkers that appeared to be directly above you.

Eventually we finished climbing the worst of it and began to make our way around the volcanoes crater. Watching the sunrise from above the clouds at this altitude with the curvature of the earth was just amazing! We continued walking around the crater, past the ice glaciers and eventually, after 6.5 hours of climbing we reached Uhuru Peak, the summit!

Reaching the top was very emotional for some of us. Mike scattered some of his mother’s ashes and we all took a moment to appreciate what we had done.

The altitude was tough up here though, so we got a quick photo and began our descent back down to Kibo. We stopped at Kibo for a couple of hours, had some food and set off again to get down to our accommodation for the night at Horombo Huts.

Absolutely exhausted, we had some tea and got our heads down for the night! Refreshed and ready to the final leg.

Day 5 - We had a laugh on our way back down the mountain. Relieved it was done and shouting Good Luck to all the poor people just setting off. Werner even caught a lift in the mountain ambulance!

Once we arrived at the gate, we had a lovely lunch with all the porters and team who sang songs to us and presented us with our certificates. In total we had walked over 43 miles, climbing to a height of 5,895metres (19,340 ft).

There were so many funny moments on the trip, a strong team bond was formed and so many memories were made that we will all share forever.

The joy of a clean toilet will never be underestimated again.

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

The sands of time are fast running out on the current UK parliament. We have just witnessed what will almost certainly be the final set of Party Conferences before the next UK General Election.

In theory this might take place as late as January 2025 but Conservative Party strategists have already earmarked three potential dates next year - 2 May (to coincide with local elections), 20 June (to allow those local contests to test the political temperature) and 3 October (to enable the impact of any economic recovery to be maximised before going to the country).

The Conservatives have been in office since 2010 and the fifth consecutive term they are seeking would be unprecedented in the age of universal voting. Turbulence has been the new normal in British politics since the referendum of June 2016 when the UK people voted to leave the European Union. Remarkably it has been the Conservatives who have retained office throughout this period, winning two elections and holding office under five different Prime Ministers. However, the political and economic disruption caused by Brexit has been compounded by the adverse impact on the cost of living of the covid pandemic and the Russia-Ukraine war. Inflation is at a 40 year high and our national debt has almost tripled since the Conservatives came to office.

After all this upheaval there are now deep ideological and personality divisions within the Conservative Party. Privately most of its MPs expect the next election to be lost; the sense that it is 'time for a change' is now overwhelming.  Indeed the current Prime Minister, Rishi Sunak, implicitly recognises this. His fresh pitch at last week's Conservative conference was a daring one - to position himself as the candidate of change, rejecting the short-termism of all of his recent predecessors. This has clear risks. For one it has antagonised former leaders - everyone understood that there was no love lost between Sunak and either Johnson or Truss, but in recent days David Cameron and Theresa May have also been publicly critical of him.

Sunak is a highly intelligent, diligent administrator never happier than analysing data and spread sheets. After the chaotic drama of recent years he offers competent, stable governance. But in truth he probably lacks the inspirational qualities that are also now needed to revive the Conservatives' fortunes. The opinion polls have been remarkably consistent since the beginning of the year and they all point to a crushing Conservative defeat. The events that are now playing out in Israel and Gaza may also pose a huge threat to short-term global economic confidence and growth. If history is any guide, a surge in oil and gas prices may drag Western economies into a recession over the next year or so, which is likely to be to the detriment of incumbent governments having to seek re-election.

Nevertheless it is worth remembering that one of the great charms of politics is its sheer unpredictability. It was only a little over two years ago (May 2021) that the Conservatives won the traditionally safe Labour seat of Hartlepool on a massive swing at a by-election. The confident talk then was that the 2020s would be the Boris Johnson decade and most commentators wrote off the prospects of Sir Keir Starmer, invariably predicting that he would end up as just another name in a lengthening list of former Leaders of the Opposition before Labour eventually made it back into office.

Today the self-same political experts are absolutely adamant that Starmer will win the next election. Perhaps he will - but to his credit he and his team are taking nothing for granted. The tide began to turn on his leadership not only as a consequence of unforced government errors, but when Starmer was able to persuade people of the calibre of Rachel Reeves (Shadow Chancellor) and Yvette Cooper (Shadow Home Secretary) to return to the front bench fold.

They have been followed more recently by a stream of high-flying civil servants in key back room roles. A further bloc of experienced operators from the Tony Blair and Gordon Brown foundations have also returned to the colours as Government office now appears within their grasp.

One of the reasons we have heard much in recent months about Labour's plans for constitutional change and blue sky thinking about reinventing the public sector is the implicit recognition that the state of the public finances will give any incoming Labour government very little room for manoeuvre on public spending.

Here is the strange paradox. Since the financial crisis of 2007-08 and the era of stagnant or diminishing living standards UK voters have moved well to the left on economic issues. Today a majority even of Tory voters support renationalising public utilities, such as water and the railways, and introducing wealth taxes for the super-rich. But this falling away of public support for free markets and capitalism has not resulted in people being persuaded to vote for Labour politicians espousing these values. This will lie at the heart of the Labour appeal over the next year which is likely to focus more on stability than radical change.

The strapline of Keir Starmer's speech at his Party's conference was a "decade of national renewal". This echoes recent interventions and interviews from his most prominent and trusted younger generation spokesmen from Rachel Reeves to Wes Streeting and Jonny Reynolds. It is an express call for at least two terms of government. In the first the offer is to stabilise the UK economy and public services; only in a second term will radical new centre-left investment and initiatives be possible. Ironically after 13 years of Opposition Labour's appeal is more one of security and stability rather than change. This mirrors the strategy in 1996-97, the last time Labour came into office (under Tony Blair) when the essential message was change the faces in government but not to do anything too radical in policy terms.

Many of Labour's most fervent supporters are looking for a much bolder approach. But they are unlikely to get their way. Instead the 'steady as she goes' strategy is playing out in two other ways. First in the ruthlessly tight grip that the leadership has taken over candidate selection. It is very wary of any internal dissent and wants only compliant centrists to make up the bulk of the incoming parliamentary party. This is a far cry, incidentally, from many new MPs in the 2017 and 2019 intakes who were left-wing activists in the image of the then party leader, Jeremy Corbyn. Many of these MPs have kept their own counsel in recent months, but they will remain a presence on the Labour benches for years to come.

Finally in the area of tax and spend, Starmer and Reeves are determined to take an orthodox approach and will likely emulate Blair/Brown in the run-up to 1997 by pledging to keep to the outgoing government's budgetary plans. We were then blind-sided by Gordon Brown rustling up some 'new' money, so to speak, by altering what appeared to be arcane rules by abolishing substantial tax relief on dividends that pension funds received on their investments. This £6 billion annual tax grab along with the 3G spectrum auction which brought in an unanticipated £20 billion windfall gave the incoming government something to invest. It is worth thinking now about equivalent opportunities that an incoming Labour Chancellor might pounce on to give herself some room for fresh initiatives.

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

Welcome to the Quarterly Investment Review for Q3 2023.

Our Investment team have put together a range of resources to update you on what has happened in the markets across the third quarter of 2023. Here you will find: 

  • High-level, global equity performance analysis
  • Videos and interviews from our team covering Q3's hot topics
  • A written summary of the quarter's main market events

Global Equity Performance Analysis:

The graph below shows global equity performance across the quarter and plots world events along the performance line.

Hear from our Team:

Trends, Themes and Investment Insights

Relationship and Business Development Manager, Donald Beggs and Head of Funds, James Fitzpatrick, discuss important topics from across the quarter, including interest rates and the clean energy sector.


South African Perspectives: Offshore Investing

Business Development Consultant Tatenda Chikombero interviews Business Development Manager, Lerato Lebitsa on the current landscape for investors in South Africa and the role offshore investment plays.


Is Now a Good Time to Invest in Emerging Markets?

Portfolio Manager Matthew Seaward explores the performance of Emerging Markets over Q3.


Summary & Outlook - Q3 2023:

Global equity markets posted losses during the third quarter; with the US, EU, and Japan falling -3.7%, -5% and -5.6% respectively in home currency terms. The Chinese market fell over 3% while Hong Kong was also weak, down over 7%. The UK equity market proved to be more resilient owing to its ‘value’ tilt and high exposure to oil and financial stocks achieving a positive return of 0.8%. This also reflected the relative cheapness of UK valuations which have not become as stretched as US valuations on a year-to-date basis.

Market sentiment was overall positive in July especially in the US where the AI rally continued to gain momentum, driving markets higher. Chip maker Nvidia was a notable beneficiary, reporting Q2 revenues of $13.51 billion, up 101% from a year ago and 88% from the previous quarter. However, as central banks began signalling to markets that rates would likely remain high and indeed ‘higher for longer’, and that a pivot in policy expectations towards cuts was not imminent, equity and bond markets both began to suffer. The reality of potentially higher peak interest rates also led to global government debt selling off as yields rose. This was reflected most markedly in the US bond market, where the US 10-year Treasury yield touched 16 year highs of 4.6% in late September as Fed officials guided that ongoing inflationary pressures could see interest rates remaining on an upwards trajectory.

The prospect of higher interest rates becoming the new normal has hurt equity valuations as higher discount rates are factored in for longer periods. This has also put strain on company growth prospects for those companies previously reliant on cheap debt for financing. Such a background has resulted in a poor August and a notably painful September for markets.

In terms of macroeconomic figures, August CPI readings for the US came in at 3.7% YOY while UK CPI remained high at 6.4% YOY. US Q2 GDP grew at a healthy annualised rate of 2.1% while UK Q2 GBP grew at 0.2%. UK wages also grew 7.3% in May ahead of expectations, an indication that the labour market remains tight.

Markets were indecisive about a rate rise in September, but in the event UK and US central banks chose to pause, with the US Federal Reserve staying put at 5.5% and UK Bank of England also holding at 5.25%. However, the European Central Bank increased the Deposit Rate from 3.75% to 4%. Rates are likely to be held at or close to current levels until well into next year, and yield curves are still inverted, with US Treasury 2-year yields at 5.1% and the UK Gilt 2 year at 4.7% alongside 10-year yields at 4.4%. in conclusion, we are unlikely to see any material cuts to interest rates until it is clear to central banks that inflationary pressures are well under control. It was noteworthy that Fitch downgraded the US long-term Issuer Default Rating (IDR) from ‘AAA’ to ‘AA+’ in early August on concerns about growth in government debt and on the ability of Congress to control spending, though this had little effect on markets.

Asian markets were shaken in September by the news that embattled Chinese property giant Evergrande was plagued by further issues. The stock itself was again suspended only a month after it had resumed trading following a 17 month suspension. Another Chinese property giant, Country Garden, also narrowly avoided default after reporting record losses and debts of more than $150bn. This weakness is a material concern as the Chinese property sector accounts for around 25% of China’s GDP and the bursting of the Chinese property bubble raises contagion concerns. China Q2 GBP grew 6.3% year on year, below expectation, and growth fell 0.6% quarter on quarter. Consumer spending, investment and trade all remain on the weak side, and the economy is only expected to grow 4% over the year as a whole.

Though gold typically acts as an inflation hedge, gold was down -3.7% in USD terms to $1848 against the higher interest rate background. During the quarter we exited our gold position and redeployed the proceeds into Treasuries and high yield fixed interest to take advantage of the high yields available. In contrast oil rallied by 27.3% in USD terms over the quarter to $95 a barrel. The US Dollar also appreciated against most currencies, up by 4.1% against Sterling over the quarter.

We find ourselves in an uncertain environment as the pressures of growth, inflation, and monetary and fiscal policy vie against one another, increasing the range of potential forward macroeconomic outcomes. Most global equity markets remain positive in the year to date, but for now we must cautiously assess developments as they take place, keeping an eye on valuations, the economic backdrop, and central bank responses. Inflation risks persist and central banks continue to monitor their progress in curbing inflation. There also remains the question of whether central banks will indeed pull off a soft landing or if the slowdown will be more severe. Central banks may be forced next year to adopt a more dovish stance if economic data suggests more damage is being done to the economy than necessary, but it remains too early at this stage to be sure. In this scenario, quality companies with strong balance sheets and good cash flows are key, and we will aim to add to such should valuations fall much further.

Disclaimer: The views, thoughts and opinions expressed within the articles, videos and soundbites are those of the authors/ speakers and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit.

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