Category: Market Update
Market Update: PPI pullback and the ‘new normal’ for inflation
Judging by capital market expectations, we are over the hump. The global inflation crisis of the last year-and-a-half has peaked, and price increases are now expected to trend downward in the US, UK and Europe. US Treasury yields have fallen consistently since the beginning of November and are now back to where they were in September – just before the world had a UK-inspired bond rodeo. This implies lower growth and price expectations in the years ahead, and comes on the back of a 6.5% December annual inflation reading in the US – its lowest in more than a year.
Market Update: Football fever saves UK from recession
The new year is proving to be a happy one for almost all asset classes and regions. The FTSE 100’s intraday all-time high of 7903.50 is less than 100 points away at the time of writing, and we’re closer than we were last week. The global financial press tell us markets are stronger because we should be positive about a likely easing in monetary policy, and this easing should take place because – as business leaders say – conditions are awful.
Market Update: January Surprises
“Welcome to 2023” said the note on the restaurant door. The door was shut, the lights were off, and another note explained that rail strikes meant staff and customers were unable get there. All the venues in this City-of-London street were closed in a scene reminiscent of the height of the 2020 lockdown. Life can be tough in the battle for a fair share of the economy’s revenue flow, and we cannot have been the only ones left feeling that the UK is off to one of the most subdued starts to a new year we can remember.
Market Update: Central bank scrooges cancel Santa rally
In our opinion, it's too early for the developed world’s central bankers to say the battle against inflation is nearing an end, even though year-on-year inflation has started to move off the peak. Inflation rates published this week show they may have peaked in aggregate, but consumer prices are still heading generally higher, which is likely to also keep inflation overall higher for longer.
Market Update: Fed up before Christmas
One of the first principles of any sound investment process is to permit and nurture the discourse of differing opinions in order to generate the most robust insights and decisions possible. Unsurprisingly then, this is exactly what has characterised this year, as we have absorbed various guidance and deductions regarding possible underlying reasons for asset price movements. As the year comes to a close, some of the year’s big trends have showed signs of stopping or even reversing, and we have debated the ‘reasons’ for those changes vigorously. This process is important because we must understand the past and the...
Market Update: Not so bad, it is almost good
December has begun on a positive footing for investors. A renewed pivot in sentiment, with market participants choosing to focus on the positives rather than the negatives, has brought the third extended market upswing of 2022, with various equity markets now trading above bear market territory again.
Market Update: Markets give thanks
The last week of November is generally a quiet one for markets. Many professional investors head back to family homes in the days before Thanksgiving, and will have already closed down their risk positions for the year. Few like to be exposed to markets when there are lower trading volumes in December, and this may be one of the reasons why US equity markets tend to enjoy a seasonal boost in the last quarter.
Market Update: Plugging the holes
The Autumn Statement, budget-in-all-but-name, had been sign posted as very likely to bring bad news to UK taxpayers, as the third Conservative government of this parliament changed course from Trussonomics back to Rishinomics. What was announced in the end was less bad than what had been leaked beforehand, which is how bad news tend to be sold. With fiscal responsibility returning to the UK, and with it a certain predictability in policymaking, this Autumn ‘budget’ was perceived as quite sensible from a capital market perspective with sterling and bond yields closing within their most recent trading ranges.
2022 Autumn Budget Highlights
Jeremy Hunt delivered his first statement as Chancellor of the Exchequer at a time of great challenge for the UK and global economies with the backdrop of sky-high inflation, recessionary warnings, high interest rates and the ongoing war in Ukraine. In his first few days in office, he had already reversed most of the measures announced in his predecessor's September Mini Budget. He has now set out a series of tax rises and allowance freezes & cuts to help combat the ‘black hole’ of public spending set out in the September mini-budget.
Market Update: Signs of ‘peak inflation’ emboldens markets
There were three big market-moving stories last week: the US midterm elections, the latest crash in the surreal world of crypto currencies, and the release of US inflation data for October. By Friday, it was the lower-than-expected inflation data that dominated in terms of market activity.
Market Update: Diverging paths accompanied by seasonally scary messages
Considering the gloomy news last week from central banks in the US and UK, investors enjoyed a decent enough start to November. Following on from the rebound over the second half of October, it has been welcome news that capital markets no longer seem to overly mind when central banks push through yet another set of jumbo rate rises, accompanied by a continuation of gloomy outlook statements.
Market Update: US slows, Europe’s winter outlook improves, UK back to start
The most turbulent October experienced by UK bond markets since 2008 is drawing to an end and one could easily get the impression nothing of significance happened. Sterling is back to where it traded just before that fateful 23 September ‘fiscal event’, and bond yields are likewise roughly back to where they started in Autumn. This is good news: it shows the UK still has effective institutions capable of reversing errors and preventing major collateral damage. Unfortunately, though, some of its credibility in international capital markets has been lost. As a result, the government’s fiscal headroom of what it can...
Market Update: The World Beyond the UK
Given the volatility in UK politics over the week, broader capital markets felt like a sea of calm in comparison. As far as the outcomes from the political side are concerned, markets had already priced in the upside on sterling, based on the belief unfunded tax cuts were no longer on the agenda, but not another leadership hiatus or even the possibility of an early general election.
Market Update: Will the UK Property Downturn Change the Investment Landscape?
In the wake of Kwasi Kwarteng’s ill-received budget, mortgages were the hot topic. Lenders pulled swathes of mortgage products in expectation of sharply higher interest rates from the Bank of England. When those products were reintroduced a few days later, the rates offered were three to four times higher. The potential effects on consumers and households were well-publicised – and the backlash therein was no doubt a big motivator for the government’s partial U-turn.
Market Update: Reading the Runes of Last Week’s Market Bounce
Market volatility has been in the air all year and given the macroeconomic backdrop this is not at all surprising. A weakening global economy marred by war and labour market-driven supply squeezes, while simultaneously trying to cope with aggressive central bank rate hiking to prevent inflation turning permanent, all makes for the distinct whiff of recession. But volatile markets do not always swipe down, as the beginning of last week showed, nor do they stay volatile forever.
Market Update: Loss of Trust?
Last week provided the evidence for the fragility of capital markets as they grapple with the strain of transitioning from an ultra-low interest rate environment back to the one we knew before the global financial crisis of 2008. A policy mistake around the smaller part of the UK government’s fiscal measures aimed at fending off a looming recession rattled international capital markets to such an extent that it is now likely to create far more headwind than support for the UK’s economy in the winter ahead.
Market Update: Competing Policy Measures Leave Markets Worried
The last two weeks have been sobering for investors world-wide, with all major markets (including bond markets) falling between 5% and 10%. This has come after an encouraging recovery rally over the summer that was driven by falling oil prices, which fuelled expectations that the worst of the inflationary headwinds were behind us, allowing central banks to pause their aggressive monetary tightening course, and that a turnaround in economic fortunes was therefore imminent.
Market Update: The Fed at work and China snubs Putin
Starting with investment concerns, the consequences of a European war continue to dominate our economy and markets, as it does throughout Western Europe and, to some degree Asia. Meanwhile, seemingly unaffected by the rest of the world, the US is blazing its own trail.
Market Update: The End of Eras
With great sadness, we pass from the second Elizabethan age. Our Queen was a constant during this period of intensely rapid change. Across the political spectrum, we can acknowledge her ceaseless responsibility to her people. She retained her dignity as monarch throughout her reign supported by her faith and her humanity that was obvious to all.
Market Update: Waiting for Policy Action
The summer is nearing its end and with it the return of the more typical English late summer climes. It may feel as if markets have taken a hint with their 5-day downdraft until Thursday, although most outsiders will look at the week’s media frenzy and blame the tumble on the truly intimidating outlook for energy bills during the winter heating season.