What does the chart show?
 
This chart shows the performance of a variety of major asset classes in the first half of 2023. Global Developed Market Equities, as shown by the MSCI World index, continued their strong performance from the end of last year to finish +15% despite facing difficulties during the US banking crisis in early March. The turmoil during the crisis helped drive the price of gold which has since slightly receded to finish +5.2%. Emerging Market Equities (as measured by the MSCI Emerging Market Equity Index) lagged Developed Market Equities, but still finished the first half of the year almost +5%. Even with all the uncertainty in markets, US Fixed Income Securities have remained stable so far this year, with US Treasuries and US Investment Grade credit returning +1.6% and +3.2% respectively. Having outperformed significantly in 2022, Commodities have struggled to date in 2023, finishing the first half of the year -7.1%.

 Why is this important?

 2023 has been a fascinating year so far, as markets recover from a difficult 2022. At first glance there are reasons for optimism, with positive performance in equities in both Developed and Emerging Markets. However, there are concerns over the breadth of this year’s Equity rally, especially in the US where the majority of returns are attributable to just a few large stocks, mainly in the high-growth technology industry. Outside of these firms, returns have been muted, suggesting that an element of caution is still prevalent for the months ahead for the wider market. The performance of Fixed Income Securities also seems to indicate significant levels of uncertainty. Investors have struggled to reach a decision on future economic outlook, as inflation and economic strength have continued to defy expectations, despite the ongoing rate hikes. This has led to fluctuations in bond markets throughout 2023. Even with this uncertainty in bond markets, both Treasuries and Investment Grade Credit have delivered positive returns to investors so far this year. Fears of an impending recession are more evident in the performance of Commodities. Expectations of a cooldown in economic activity have driven commodity prices steadily downwards throughout the year. While this steady decline has brought the price of Commodities down from their 2022 peaks, which has helped to ease inflation, prices are still higher than their pre-pandemic levels, leading to suggestions that this may simply be a normalisation from the extreme levels seen last year, rather than due to increasing fears of a recession. Wide deviations in asset class performance this year have contributed further to the uncertainty in markets, but while short-term risks remain, the volatility in markets mean that longer-term opportunities are continuing to emerge.