September 2023

The Acuvest investment committee convened over two days in August to assess market dynamics and reevaluate the positioning of client portfolios. These meetings benefited from both external perspectives and the insights of our committee members. Here are my summarised takeaways from our in-depth discussions:

  • Up to the end of July, equity markets have outperformed our expectations. However, since July, the markets have experienced volatility – declining in early August but rebounding thereafter. They’re now nearly at the same level as at the start of 2022, as illustrated in the chart below.
  • Headline inflation is on the decline, but it’s premature for central bankers to celebrate, given that core inflation remains uncomfortably high.
  • Despite economic deceleration, the surprising element has been the robustness of the economy, primarily driven by resilient consumer spending.
  • Why hasn’t the marked rise in interest rates over the past year resulted in weaker economic figures? It’s counterintuitive to believe that such a swift uptick in financing costs hasn’t adversely affected consumers and businesses.
  • Our most plausible explanation leans toward a lag effect, suggesting that economic conditions might unfortunately worsen before improving. We believe the job market’s trajectory is the key indicator to monitor.
  • Put simply, the primary factor that could erode consumer confidence is job security. As of now, the global job market remains robust. However, there are indications that the pace of job growth in the US has decelerated over the past three months.
  • China is also not proving the tailwind to global growth that many people expected at the start of the year (more on China later in this note).

Equity Market Performance 1.1.22 to 5.9.23

Source: MSCI, ACWI, local currency. 1.1.22 to 5.9.23

August and YTD Market Numbers

Presented below is our usual monthly and year-to-date return table. Equities have seen a notable increase of 15% YTD, while bonds have risen by circa 3%. Another significant observation from the table is the recent increase in energy costs. Though these costs haven’t reached the peaks seen last year, the current uptrend in oil and natural gas prices is likely to exert upward pressure on headline inflation.

Headline Inflation Unchanged from July but Core Inflation Falls Slightly

In August, the Euro area’s headline inflation remained steady at 5.3%. The core Euro inflation, represented by the yellow line, experienced a slight decrease from 5.5% to 5.3%. However, at that level the goal of bringing inflation back down to 2% seems to be a distant target.

Interest Rates

After a 0.25% rate hike in both the US and Euro areas in July, market analysts anticipate that central banks will hold off on further increases in September. While there may still be additional hikes later this year, it’s anticipated that we are approaching the peak.

Better Cash Returns Available

Regular readers are well aware that we’ve been emphasising the reluctance of banks to pass on interest rate hikes to depositors for quite some time. While recent weeks have seen banks introducing seemingly more attractive “headline” rates, the reality is that individuals with substantial deposits still face disappointingly low returns.

Fortunately, higher yields can be found for investors willing to diversify beyond traditional bank deposits. We remain committed to assisting our clients in accessing these more lucrative returns.

A summary of China’s Situation

China faces mounting economic challenges, including property sector turmoil, increasing local government debt and weak consumption. Despite external pressures to bolster spending and support the currency, President Xi Jinping has been hesitant to implement broad-based stimulus. Analysts suggest Xi’s domestic and external security focus influences his economic decisions. While Beijing prioritises security and self-reliance over rapid economic growth, there have been relatively small interventions to support the property market and the renminbi. However, broader economic reforms remain restrained. Xi’s “common prosperity” policy, aimed at controlling China’s billionaires and reducing inequality has impacted private sector confidence, further complicating economic recovery.

Insights from Jackson Hole, Wyoming

At the end of August each year dozens of central bankers, policymakers, academics and economists gather from around the world for the annual Jackson Hole Economic Symposium. Key speeches include those made by Jerome Powell (US Fed) and Christine Lagarde (ECB).

Given the importance of central banks to economies and investment markets, I find it useful to study these from time to time. The one that caught my attention the most was Lagarde’s speech which I have summarised here.

The key words to summarise the above to me are “CHANGE” and as a result “UNCERTAINTY”. For those interested, here’s the link to the full speech: Policymaking in an age of shifts and breaks (

Our Investment Outlook

We remain cautious in our outlook. This caution stems from:

  • The latency in the effects of higher rates.
  • Persistently high core inflation.
  • Divergent indicators that present a mixed economic picture.

Ukraine and other geopolitical risks remain significant with bad outcomes not currently priced into markets. The core assumption of markets remains that the Ukraine war will not end, or escalate significantly, any time soon.

Overall, markets are likely to remain volatile until there is more certainty around (a) financial stability (b) core inflation falling back to the target of 2% and (c) the depth and length of economic slowdowns / recessions.

For short-term investors, this is not a market to be in but for our clients who are long-term investors, we continue to advise them to follow their plan and use market weakness to build on positions.


John Tuohy is Chief Executive of Acuvest, an Irish-owned, independent advisory firm specialising in wealth management, pensions, and investment advisory services for individuals, companies, pension schemes, charities, and institutions. John is a Chartered Financial Analyst (CFA) and a Fellow of the Chartered Association of Certified Accountants.