The Equitile Resilience Fund (UK-domiciled) aims to deliver capital growth by investing in large, growing companies in the developed markets. It is managed according to our core investment principles and uses the Equitile Fair Fee Model.
The Equitile Global Equity Fund (Ireland-domiciled ICAV) follows the same strategy and principles as the Equitile Resilience Fund. The lastest update and other documents can be found here.
July saw equity markets bounce back from the sharp losses of June, supported by earnings releases and less hawkish commentary from the Federal Reserve.
Almost half of your holdings have reported Q2 2022 results so far. We are pleased to say the numbers remain healthy. On average, your companies’ earnings are showing an annual growth rate of 31% with stable operating margins at around 33%. Reassuringly, almost a quarter of them have raised their financial targets for H2 2022. So far, there is little discernible evidence of the global slowdown in the financial statements of your investments.
In his July 27th press conference, Fed Chairman Powell surprised markets by suggesting the Fed had already brought interest rates to a neutral level: “I'd start by saying we've been saying we would move expeditiously to get to the range of neutral. And I think we've done that now. We're at 2.25 to 2.5 and that's right in the range of what we think is neutral.” On the face of it, it is difficult to reconcile such a low neutral interest rate with the current U.S. inflation rate of 9.1%. However, Chairman Powell appears willing to err on the dovish side, presumably expecting an easing of supply bottlenecks together with weaker demand will soon bring inflation down.
In our view, Chairman Powell is right to moderate expectations over the likely pace of rate hikes. If, as we suspect, much of the recent inflation surge is due to temporary supply chain bottlenecks then substantial interest rate adjustments may prove unnecessary and could quickly look like a policy error. Arguably, both last year’s ‘boom’ and this year’s ‘bust’ are the inevitable aftershocks of suddenly releasing the global economy from the Covid lockdowns. If so, these abnormal cycles should attenuate naturally over time without substantial policy action.
We have made no substantive changes to your portfolio during the month.