top of page
Crane Construction

Ark Review of the Month

February 2023

Global Market


The European Central Bank, the Bank of England and the Federal Reserve all announced rate increases in early February, in line with market expectations. The central banks expressed that despite the recent decline, inflation remains high and their job is not done yet. Expectations that central banks would continue to raise interest rates led to higher yields in global bond markets early in the year, and bond prices continued to fall. In February. The US Treasury prices fell by 2.3%, German Bund prices fell by 2.4%, and the UK Gilt prices fell by 3.5%. Global investment-grade corporate bond prices fell by 3.2%.


Equity markets, on the other hand, showed some differentiations. The FTSE All-Share Index was up 1.5% in February, while the MSCI Europe ex-UK Index was up 1.3%. The S&P 500 was down by 2.4%, while the MSCI Emerging Markets Index was down by 6.5%.


As of 28 Feb 2023:



UK 10 Year Gilt Yield 3.71%

US 10 Year Treasury Yield 3.92%

Germany 10 Year Bund Yield 2.65%

UK Market

Data from the Office for National Statistics (ONS) showed that UK GDP declined 0.5% in December and was flat for the fourth quarter of 2022, meaning it just managed to avoid falling into a technical recession. Economic output in hospitality, transport and health services sectors fell severely, partly due to the series of strike actions at year-end. Average people are spending more cautiously against a backdrop of high inflation. Businesses are also facing rising costs.


In January 2023, inflation in the UK was 10.1%, down from 10.5% in December. In February, the Bank of England forecasted that the inflation would fall to around 4% by the end of 2023. Falling wholesale gas prices may cause energy bills to come down later in the year. In addition, global supply chain pressures that drove up imported goods prices in 2021 and 2022 have eased. The UK economy is, however, more exposed to rising rates than other economies given the shorter mortgage fixed terms compared with the US and most of Europe.


On 27 February, the UK and the EU struck a deal on post-Brexit trade rules for Northern Ireland, known as the Windsor Framework. New rules include setting up green lanes to further fast-track goods being transported for use in Northern Ireland. Trade in Northern Ireland has been one of the most contentious issues during the Brexit process. The new Windsor Framework will replace the previous Northern Ireland Protocol, and pave the way for a new chapter in London's relationship with the EU, which will be a major benefit to the British economy.

Ark Insights

On 28 February, the yield of 6-month US Treasury Bill reached 5.14%, its highest level since 2007, and for the first time in two decades, above the 5.07% yield of a classic 60/40 US stocks and bonds portfolio (calculated based on the weighted average yields of the S&P 500 Index and the Bloomberg US Aggregate Bond Index). The yields of US Treasuries are generally considered risk-free rates and widely used as benchmark indexes in the global financial markets. Such short-term securities are also referred to as "cash" in investing parlance. As the return on cash and near-cash investments rises sharply, the incentive for investors to take equity market risks has decreased significantly.


We have also seen a number of our long-term UK fixed income holdings recently reached yields to maturity of 4%-5%, the highest level in years. One of them, Paragon Banking Group PLC, just received a long-term issuer default rating of "BBB+" with a stable outlook from Fitch in February. Key rating drivers include the banking group's long-established business model as a lender in the UK buy-to-let mortgage market and the continued expansion of its other commercial lending activities, including real-estate development financing and motor financing. The ratings reflect the company's sound profitability and capitalisation, as well as the resilience of the buy-to-let market during economic downturns.


With the end of the 2022/23 tax year approaching, if you wish to utilise this year's ISA and SIPP tax-free investment allowances and make a long-term investment plan for you and your family, please feel free to contact your advisor at any time.

As always, our Investor Relations team would be more than happy to help you with any queries.


The views expressed in this update are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The views reflect the views of Ark Investment Management at the date of this document and, whilst the opinions stated are honestly held, they are not guaranteed and should not be relied upon and may be subject to change without notice. Investments entail risks. Past performance is not necessarily a guide to future performance. There is no guarantee that you will recover the amount of your original investment. The information contained in this update does not constitute investment advice and should not be used as the basis of any investment decision. Any references to specific securities or indices are included for the purposes of illustration only and should not be construed as a recommendation to either buy or sell these securities or invest in a particular sector. If you are in any doubt, please speak to us or your financial adviser as appropriate.

Issued by Ark Investment Management Ltd which is authorised and regulated by the Financial Conduct Authority. 

© Ark Investment Management Ltd. Registered in England & Wales with the company number 09281759.

bottom of page