Wise Multi-Asset Growth

Aside from the above, the main focus in August was on central banks, particularly in the US and the UK, where the tug-of-war between inflationary pressures and weakening growth are making central bankers’ decisions on interest rates harder. Firstly, in the US, while inflation figures remained unchanged at the consumer products level, there was increasing evidence that companies are feeling costs pressure from tariffs. Procter & Gamble, the multinational consumer goods company, announced it will have to increase its prices for household products by 5% this year. Similarly, Walmart, the supermarket behemoth and the world’s largest company by revenue, announced its profits were being squeezed by increased import costs. As such, it is becoming increasingly likely that inflation will be on the rise in the coming months as companies will see no other choice than pass on increased costs to consumers. For now though, the immediate concern is on the strength of the jobs market as previously released strong employment figures were revised sharply lower. Revisions occur every month, but investors have the bad habit of focussing mainly on the preliminary data, only paying attention to revisions when they are abnormal like this month (it was the biggest revision since records began aside from the Covid period). The revision also captured Trump’s attention who fired the head of the Bureau of Labour Statistics department as a result, on the accusation of falsifying the numbers to paint a bleak picture of the economy. This was a convenient excuse for Trump to place a loyalist in one of the key government statistics departments. Even more worryingly, this is also a tactic he is trying to emulate at the US central bank (the Fed) which he wants to cut interest rates aggressively, by firing one of the seven governors in charge of such decisions. This will be tested in court since the Fed’s independence was enshrined in law in 1951 in order to avoid political interferences like this one. If Trump succeeds in politicising such a pillar of global investors’ confidence and the Fed’s independence starts being questioned, one should expect some turmoil in financial markets, particularly in the bond and currency markets initially.  For the time being, the Fed left its interest rates unchanged in August, despite constant pressure from Trump for cuts, but its chairman opened the door to a rate cut in September due to the deterioration in the labour market. With inflation on the rise though and what could be a stagflationary period (higher inflation and higher unemployment) ahead, it will be a tricky balancing act for the central bank.

Similarly, in the UK, inflation rose to the highest since January 2024 to 3.8%, creating an issue for the Bank of England (BoE). Meanwhile, employment data showed a weakening trend, echoing the situation in the US. Earlier in the month, the BoE cut rates by 0.25% to 4% for the fifth time in a year. In an unprecedented vote, the committee needed two rounds to reach a majority decision showing, like in the US, the tricky balancing act central bankers are faced with. Unlike the Fed, it is likely that the BoE will be more concerned with inflation rather than growth at this stage, which would lead it to pause its rate cuts in the coming months.

In other potentially significant market news, in France, after months trying to find a consensus on a plan to tackle the unsustainably high deficit, the Prime Minister called a vote of confidence for 8^th September which, at the time of writing, looks like it will fail, deepening the crisis in the country.

In the short term, investors generally looked through the developments above, despite their significance, pushing equities to new highs. The combination of strong reported earnings and the expectation of a rate cut in the US generally supported sentiment and kept volatility low. That said, defensive assets like gold were also strong, highlighting a certain degree of unease.

In August, the IFSL Wise Multi-Asset Growth Fund was up 1.2%, behind the CBOE UK All Companies Index (+1.5%) but ahead of its peer group, the IA Flexible Investment sector (+0.4%). Our biggest contributor was the Jupiter Gold & Silver Fund, up more than 15% thanks to the solid performance of precious metals and even more so of the gold mining companies which are strongly cash generative and increasingly returning cash to shareholders. Our healthcare trusts continued their strong rebound from last month, thanks to more constructive comments on the sector from the White House and mergers and acquisitions. Our main detractors were in the UK smaller companies space as they struggled despite the general good performance elsewhere.

In terms of portfolio activity, we trimmed positions in Jupiter Gold & Silver, Fidelity China Special Situations and Oakley Capital Investments after strong returns. We redeployed some of the cash we raised in recent weeks on weakness in the renewables and infrastructure sector. We also topped up TR Property which has been broadly flat for the past 3 months. Finally, we completed our switch out of Caledonia into RIT Capital. The former has been a longstanding holding in our portfolio and is one of our strongest historical contributors, but we believe that RIT Capital, with new management, a deeper portfolio of private companies, many in exciting technology and AI sectors, and an attractive discount has got more potential to rerate from here. Our cash levels remained elevated relative to history as we continue to expect some volatility over the coming weeks.