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Modern Bridge

Ark Review of the Month

September 2022

Global Market


Global inflationary pressures eased during the quarter due to lower oil and food prices. However, equity and bond markets plunged again in September. In Q3, the FTSE All-Share Index fell by 3.4%, the MSCI Europe ex-UK Index fell by 4.5%, and the U.S. S&P 500 Index fell by 4.9%.


Global sovereign bonds dropped by 7.4% in the three months to the end of September, with UK Gilt prices down 13.6% and US Treasury prices down 4.3%. Global investment-grade corporate bond prices fell by 6.5%.


Government bonds yield as of 30 September:

UK Gilt 10 Year @4.15%
US Treasury 10 Year @3.83%
German Bund 10 Year @2.11%

UK Market

GDP in the UK was flat (+0.0%) in May-July 2022 compared to the previous three-month period (February-April). Services output was up by 2.4% in the three months to July 2022 compared to last year. Manufacturing output rose by 1.7%. CPI inflation was 9.9% in August 2022, down from 10.1% in July.


The Bank of England's Monetary Policy Committee announced after its meeting on 22 September, to increase the base rate by 0.5% to 2.25%, marking the seventh increase in a row. According to a poll of economists conducted by Reuters before the meeting, interest rates are expected to reach 3% by the end of the year, reaching their highest level since November 2008.

Ark Insights

The newly appointed Chancellor Kwasi Kwarteng gave a fiscal statement, also described as a mini-budget, to Parliament on 23 September. The budget includes significant tax cuts and other policies. It is widely regarded as "the biggest tax cut in any budget since 1972". By implementing it, the government aims to have the economy growing at 2.5% in the medium term.


For businesses, the plan to increase corporate tax to 25% next year is now cancelled. The corporate tax rate will remain at 19%. For individuals, the basic rate of income tax will be reduced from 20% to 19% from April 2023. The 1.25% temporary increase in the National Insurance rate and the 1.25% increase in the dividend tax rate, both introduced earlier this year, will be reversed. The nil-rate threshold for stamp duty will be increased from £125,000 to £250,000. The threshold for first-time buyers will also increase from £300,000 to £425,000.


Borrowing this year will climb to £190 billion or about 7.5% of national income. This is the third highest peak in borrowing post World War II, following the global financial crisis and COVID-19. By 2026-27, borrowing is expected to exceed £110 billion or about 3.9% of national income. This figure is nearly £80 billion higher than the £32 billion forecast prepared by the Office for Budget Responsibility in March. Half of the increase will come from the Chancellor's now £43 billion tax cuts.


As the Institute for Fiscal Studies stated in its latest commentary, if the government could implement concerted policy reforms, or if we are lucky, we may actually see economic growth exceeding expectations. However, under current policies, the more likely scenario is that at some point in the future, we will pay for today's tax cuts through tax increases or spending cuts.

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.

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