Q2 2023 Economic Commentary

An artificial (intelligence) market?

Headline performance numbers from international equity markets over the past 6 months have been strong with the MSCI World rising 8.9% over the period. The narrative surrounding the market has been the hype surrounding artificial intelligence (AI) related stocks, relief that the US debt ceiling and banking crises are over and hope that the US Federal Reserve (Fed) is nearing the end of its monetary tightening cycle.

Whilst we were expecting a relief rally in risk assets from the pessimism of last year, the rebound has been impressive, particularly in the United States, which is a major (69%) component of the MSCI World index. In US dollar terms the S&P 500 has risen 25.3% since the lows of the market in mid-October last year and the Nasdaq 100 has risen 42.9% over the same period. Due to Sterling’s strength over the period relative to the US Dollar, returns for UK investors have reduced to 10.9% for the S&P 500 and 26.5% for the Nasdaq 100. The rise in the US market has not been widespread.