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Market Insights August 2023

August 3, 2023
Harvest News
market insights

Current Topics in Markets

Another month and another round of interest rate rises, and so far financial markets are taking it all in their stride. Inflation is very much heading in the right direction in the US and is generally expected to continue falling. In addition, talk of recession has softened considerably. Recessions are typically driven by a fall in consumer confidence and, at least in the US, there is no sign yet of consumer confidence suffering a serious dent from the interest rate rises. To a significant extent this has been helped by consumers not feeling anything yet in their mortgage repayments because of the widespread use of long term fixed rates by mortgage holders. The covid cheque distributions to consumers are also still having a cushioning effect this year.

The ECB is behind the Federal Reserve in raising rates but we believe both central banks are at or very close to the end in this rate raising cycle. In the UK, the picture looks far less rosy. While inflation has come down, it is still stubbornly high. On top of that the interest rate rises are clearly being felt mortgage holders and consumers generally.

On the corporate earnings side of things, US company margins are expected to contract somewhat over the second half of this year but to materially rebound in 2024. This view is a significant factor driving US equity market performance over recent months. Time will tell us whether this view is an over optimistic one.

market insights august 2023

Equity Markets

Having been the laggard market all year, the Chinese market experienced a sharp reversal in July, rising by almost 7% in euro terms over the month. While things remain disappointingly sluggish on the consumer side of the picture, industrial output has improved considerably and investor confidence has also been boosted by the very clear political will to provide support to the economy. In our view, the outlook for emerging markets generally (very difficult to justify at this point but China continues to be defined as an emerging market) looks to be improving. They have not had the same inflation experience as their western counterparts, interest rates are beginning to trend down in many of them and the growth outlook seems favourable.

For equity markets as a whole however, we are sticking to our cautious (ish) stance and favour value sectors of the economy over technology and other growth sectors which do look highly priced at current levels.

market insights equitys August 2023


Having held a relatively unfavourable view of bonds for quite a number of years because of our perception that they offered little value to private investors, since mid 2022 we have been encouraging clients to increase their allocations to the asset class. We simply see the risk vs. reward profile of bonds as being particularly attractive for investors currently. Yields across the bond spectrum, from sovereign to corporate , are in the mid to high single digit percentage range at present while the prospect of defaults rising sharply among corporate bonds does not look material as matters stand. Particularly for those clients seeking income, bonds offer plenty of opportunity.


Listed property vehicles were hit hard in the market downturn of 2022 as investors became increasingly uncertain about future requirements for office and other property. This has been exacerbated in 2023 in the case of leveraged property funds in the US where interest rate rises could bring very significant financial pressures to bear and the prospect of defaults is a very definite concern. Unlisted property funds in Ireland and elsewhere are also feeling the heat and many have temporarily closed their funds to investor redemptions. The sell off in property has been indiscriminate however and many areas which are still experiencing steady to strong growth, such as retail warehousing and logistics, have also been hit. As a result, there is clear medium to long term value on offer, supplemented by very attractive levels of income.


We have long held the view that alternative asset classes such as infrastructure, renewable energy and selected hedge funds have a place for investors looking to add relatively stable income driven assets to their portfolios. Infrastructure and renewable energy attract high levels of government support and this is unlikely to change and growth opportunities in these asset groups will continue as a result. They are both strong sources of yield also. Hedge funds on the other hand may offer a counter to risk of future equity market volatility.

Our Fund in Focus for August 2023 is Odyssean Investment Trust PLC.

As always, you should only consider the investment views contained in this Market Insights update in the context of your own attitude to risk and how such choices might impact your Asset Allocation model. Should you wish to discuss your investment portfolio, please contact Harvest Financial Services on 01 2375500 or email

This marketing information has been provided for discussion purposes only. It is not advice and does not take into account the investment needs and objectives, financial position, risk attitude, liquidity needs, capital security needs and/or capacity for loss of any particular person. It should not be relied upon to make investment decisions.
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