Investment market update: May 2023

| Category: News

Economies and businesses still face challenges, but statistics indicate some of the pressure, including rising inflation, is starting to ease. Read on to find out what affected investment markets in May 2023.

Remember, you should have a long-term outlook when investing. You should have an investment portfolio that reflects your goals and you feel confident in. Please contact us if you have any questions about your investments and what the current circumstances mean for you.

UK

Official figures show the UK narrowly avoided a recession after the economy grew slightly in the last two quarters to March 2023.

While the government said the figures were positive, the UK is still bottom in the G7 for growth since the pandemic. In fact, the UK economy was still 0.5% smaller in the first quarter of 2023 than it was in the final quarter of 2019.

However, both the Bank of England (BoE) and the International Monetary Fund (IMF) have upgraded the UK’s growth forecasts, which could be positive news for investors.

The BoE no longer expects a contraction, but rather for the economy to be stagnant this year.

The IMF also revised its previous prediction. The organisation’s managing director Kristalina Georgieva said authorities have taken “decisive and responsible” steps. The IMF now predicts the UK economy will grow by 0.3% this year, rather than contracting by 0.4% as previously forecast.

Inflation is still stubbornly high but in the 12 months to April 2023, it fell from 10.1% to 8.7%. Yet, the BoE has said inflation will fall slower than previously anticipated. The central bank doesn’t expect to hit its 2% inflation target until early 2025, reports suggest.

In response to high inflation, the BoE increased its base interest rate to 4.5% – the highest it’s been since October 2008.

Amid high inflation, energy firms are being accused of profiteering. BP reported bumper profits of $5 billion (£4.05 billion) and outstripped forecasts in the first three months of the year. Shell also posted first-quarter profits of $9.6 billion (£7.7 billion). The profits have led to fresh calls for a tougher windfall tax on energy giants.

According to S&P Global’s Purchasing Managers’ Index (PMI), business outlook is improving but some areas are still in contraction. The UK’s service sector posted its strongest growth in a year. However, the manufacturing industry is still in decline, although the pace of contraction is falling.

Reforms to the London Stock Exchange could mean greater risks for investors in British companies, the Financial Conduct Authority (FCA) has warned.

The regulator has plans to abolish stricter “premium” class London stock market listings. This would make it easier for company founders to retain control of their business in a bid to stop the decline of the London stock market, which has struggled to attract new companies over the last decade.

However, the FCA acknowledged that helping the UK economy would lead to higher risks for investors due to fewer checks on listed companies.

Europe

Inflation increased in the eurozone in April to 7%, figures from Eurostat revealed. The rise paved the way for the European Central Bank to make its seventh consecutive interest rate hike – it increased the base rate by 25 basis points.

Despite the rising cost of living, the European Commission (EC) said the eurozone economy “continues to show resilience in a challenging global context”, as fears of a recession start to ease.

The EC now expects member countries to grow, on average, by 1% in 2023, and by 1.7% in 2024.

Similar to the UK, PMI data indicates factories are struggling. Across the eurozone, factory output declined for the 10th consecutive month. However, the readings also suggest that the rising cost of raw materials, driven up by inflation, is starting to ease which could be good news for businesses.

Germany, the bloc’s largest economy, in particular, is facing challenges. Industrial orders fell by 10.7% month-on-month in March. The figures were significantly more than the 2.2% fall expected and the biggest slump since April 2020 when the pandemic led to businesses halting operations.

US

Headline figures paint an optimistic picture of the US.

Inflation fell slightly in April to 4.9% and the US unemployment rate fell to 3.4%, suggesting businesses are feeling confident enough to make new hires.

However, a survey from the National Federation of Independent Businesses suggests small businesses are worried about the economic outlook and worker shortages.

There are also growing concerns about banks failing in the US. The crisis started with Silicon Valley Bank collapsing in March. At the start of May, trading in the shares of two regional banks was temporarily suspended after dramatic drops.

Central banks maintain the current situation is not similar to the 2008 financial crisis, and, with the exception of Swiss bank Credit Suisse, the crisis hasn’t affected European banks.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Testimonials

Blue Ocean has always given me the help and advice that I feel protects my family’s investments. Not only have we used Blue Ocean for more than 20 years, but the team have always made us feel welcome. Always at the end of the phone for any advice we may need. Many thanks!

Russell Paul David

Rochester, Kent

A client since 2001

Professional and reactive to any questions regarding your investment.

Michael Gould

Kent

A client since 2011

Knowledgeable, approachable and always happy to discuss my issues.

Michael Southall

London

A client since 2018

Very good, friendly advice from a good team.

Stephen Williams

Kent

A client since 2010

Having been a client of Blue Ocean for the past 3-4 years, I can honestly say there is nobody I trust more with regards to my financial future than John and the team. Too good to be true? Not with Blue Ocean!

Liam Ryan

Essex

A client since 2016

I moved my investments to Blue Ocean in 2014. The advice I have received has been more professional and my investments have performed better. The staff are polite and always quick to respond to queries.

Lee Menzies

East Sussex

A client since 2014

I find them very easy to deal with. Extremely knowledgeable and with no pressure.

George Howell

Bexleyheath

A client since 2016

We have used John Doyle and Blue Ocean for over 20 years as our financial adviser for everything from mortgages, pensions, income protection, trusts and investments. His advice has always been realistic, reliable and no-nonsense. He has always understood our requirements and has advised accordingly.

Michaela Franklin

Kent

A client since 1999

Having the benefits of sound financial advice from Blue Ocean for over 20 years, I would recommend them without hesitation.

Andrew Martin

Medway, Kent

A client since 1999

I have been advised by Blue Ocean for the past 21 years, and have always found their service sound, helpful and supportive.

Louise Bober

Kent

A client since 1999

Working with Blue Ocean has enabled myself and my wife to invest our pension savings with the confidence that they are being managed by a professional team of qualified financial advisers. They have been very supportive and responsive when we've requested a detailed analysis of our investment performance and the outcome has been positive in terms of the expected returns. I have recommended family and friends to Blue Ocean and they have been equally very satisfied with the service.

Glen Ridout

Kent

A client since 2011

I love Blue Ocean Hartley! So very helpful and fantastic staff.

Christine Bryant

Dartford, Kent

A client since 2009

I have received honest advice in a relaxed, friendly environment with my personal circumstances paramount.

Janice Hill

Kent

A client since 2009

Honest, well versed, ‘personal touch’ business out to make sure everyone has satisfaction.

John Townsend

Hearn Bay, Kent

A client since 2017

Since we have used John and the team over the years our investments have gone from strength to strength. We’re very happy with the work they have done for us. I am now in a position to retire with no money worries.

Keith Yeates

Kent

A client since 2008

Blue Ocean resolved a difficult situation in a very satisfactory way. The whole staff are extremely friendly and helpful and it was very cost-effective.

Richard Mersh

Kent

A client since 2017

Bespoke service... friendly, helpful staff.

Jane Stevens

Dartford, Kent

A client since 2017

I have known John for over 20 years and have always been satisfied with his integrity, knowledge and reliability. I recommend him to business and family contacts without reserve.

Paul Richardson

Surrey

A client since 2002

Over the past 18 years, I have received very reassuring advice on my investments and always been treated in a friendly but professional manner.

Jacqueline Prosser

Surrey

A client since 2001

We would have no problem whatsoever in recommending the services of Blue Ocean for sound financial appreciation and advice, all handled in a friendly, convivial and concerned manner. Blue Ocean are always looking at how they can go that extra mile for their clients. This is a rare positive commodity in any business environment in today's world. The financial advice is always considered and simply explained in terms of what if and if you invested here etc. There is no pressure put on me to invest in high-risk return possibilities and at all stages the advice given is tailored to the perceived situation of their clients.

Barry William Ednie

Tonbridge, Kent

A client since 2013