Kames Capital: Market update

At current yield levels, the market seems to be casting doubt on the Fed’s ability to make good on its intended path of future interest rate hikes – perhaps instead choosing to focus on lacklustre inflationary pressures instead. Against this backdrop, gold fell by 1.8% and oil tumbled over 7% to just over $43 / barrel. However, risk assets continue to grind upwards, with the S&P 500 posting a record high close on Monday.

Portfolio activity

We continued to actively manage our listed infrastructure allocation, trimming our allocation to Sequoia Economic Infrastructure by around 30bps after the fund had outperformed the broad sector. We also initiated a new position in Jiangsu Expressway, a Hong Kong listed toll road operator with strong underlying cash flow generation, that helps to diversify our infrastructure exposure away from European-focussed assets. With the US Treasury yield curve flattening over recent weeks, we feel that the balance of risks is skewed towards longer-dated yields rising. To help mitigate this, we actively reduced the portfolio’s duration over the course of the week.