Economic Update

Economic resistance is about to be tested September is rarely a great month for investors, and last month proved no exception. Broadly, both equities and bond values declined and there is increasing sentiment that the 2023 market recovery is running out of steam or may even be turning. This may seem surprising to investors as…

Central bank hawks still determined to defang inflation This time last week, it still seemed as if European Central Bank (ECB) policymakers would hold off on another rate hike, following some dire economic data. But on Thursday, the ECB raised its deposit rate once again by 0.25% to an all-time high of 4%. Markets took…

Oil prices up and an ill wind for renewables So far Markets have been generally quiet during September, but energy is again becoming an issue. Oil prices have risen since the start of the summer, with Brent crude having bounced along a bottom of $73 per barrel for the first half of 2023. Compared with…

New school term has the US top of the class Summer is officially over, but we are none the wiser regarding the direction of the economy. Or are we? Generally, the inflation backdrop continues to ease, although not fast enough for comfort according to Bank of England (BoE) chief economist Huw Pill. He wants interest…

Bonds are back Last week was another difficult one for both equity and bond markets. As a result, the positive returns of July have mostly been erased so far in August. Overall, world markets are largely unchanged from a year ago. Many commentators have pointed to the rise in global bond yields as a big…

Core inflation slowdown equals upbeat equity markets We wrote at the end of last week that markets were still absorbing the prospect of another round of significant interest rate rises from central banks, and that equities would therefore come under further pressure. But by the end of last week equity markets had risen sharply, with…

Markets sour on news of resilient economy The second quarter’s positive stock market returns were driven by a somewhat surprising improvement in investor sentiment. At the end of March the fear was that the US regional banks crisis would create a more pronounced slowdown than previously anticipated, which it did not and also while bond…

A glass half-full half year The second quarter ended with positive sentiment towards global risk assets (Although UK assets have fared less well), a surprising turnaround given the black clouds that gathered back in March amid the  US regional bank crisis. Markets have responded well to more earnings positivity from analysts, but the biggest change…

Market conundrums amid volatile growth Equity markets moved higher last week, despite central bank hawkishness. We had another 0.25% rate rise from the European Central Bank (ECB) and, although the US Federal Open markets Committee (FOMC) left rates unchanged, they gave us and through their ‘dots plot’ they gave us strong hints of at least…

Disinflation sentiment cheers investors Last week was another positive one for global stock markets, with the narrative of a soft economic landing in 2023 appearing to gather support. Stock market gains in June have been spreading to the mid and small cap market segments, rather than just for a handful of mega-caps. In the US,…

Earnings improvements boost big tech stocks Last week, equity markets have generally headed higher. The most notable moves were in US stocks, with the large-cap tech names doing very well in aggregate. The Q1 earnings reports have almost all been published and, on a market-cap-weighted basis, developed world stocks have seen a return to earnings…

Trust the MPC to rain on May’s parade After a period of waiting, things are hotting up after central banks acted as expected. Although equity and bond markets have been bearing up well, in our estimation, underlying risks have increased since May began. Last week, it was the turn of the Bank of England (BoE)…

Rate sensitivity and banking failures set the tone With the coronation bank holiday behind us, the UK’s attention turns this week to the Bank of England (BoE), with its Monetary Policy Committee (MPC) expected to raise rates by 0.25% to bring the UK’s base rate to 4.5%. Last week, both Jerome Powell at the US…

Prospects of a warmer Spring Another relatively quiet week means a generally benign environment for risk assets, and recent data suggests the Spring months could be getting economically warmer. Global risk assets have been grinding higher as perceptions of external risk ebb away. Focusing on the UK economy, Friday’s retail sales data for March marked…

The return of calm bodes well for Spring Considering how unnerving the first three months of the year were, UK investors in globally-diversified multi-asset portfolios (akin to the ones we manage) have not fared too badly. Mildly positive returns across the risk spectrum tell the story of another storm having passed without sinking global capital…

A spring of hope after the gloom of winter? As the second quarter gets underway, the chances of a global recession seem lower now than they were towards the end of last year. Indeed, a combination of events during the first three months of the year have arguably reduced the likelihood of negative real growth…

Markets look beyond banking sector stress March ran the whole gamut of emotions for investors, but for the average UK investor holding globally diversified risk profiled portfolios, Q1 still ended above where it began, even if the journey was rather bumpy. Bank run fears that caused so much March angst and downward volatility quickly abated,…

Swiss parochialism backfires March continues to provide investors with the opposite of the ‘steady-as-she-goes’ environment of January and February. It appeared that global banking sector turmoil had eased after Swiss authorities officiated over a classic ‘shotgun’ marriage between Credit Suisse and UBS. Indeed, for a few days, stock markets and bond yields recovered somewhat, but…

Bank stress-testing in real-time Following the run on Silicon Valley Bank (SVB), fear has spread. The nervousness of market participants over recently elevated stock and bond valuations found its focal point and so the stock index of the aggregate global bank sector had a very bad week. SVB has become the first sizeable victim of…

Key Takeaways The closure and wind-down of Silicon Valley Bank (SVB) has led to some considerable stress in global equity markets, particularly among shares of regional banks, as well as fear of contagion. There are unique elements to SVB that contributed to its demise, including its client base and risk controls. While we are likely…

Pensions Download the latest update and tax tables here. Lifetime allowance The Chancellor announced today that from 6 April 2023 no-one will pay a lifetime allowance charge. From 6 April 2024, the lifetime allowance will be abolished and a future Finance Bill will remove the lifetime allowance completely from pensions tax legislation. The current 55%…

UK The Office for National Statistics (ONS) reported that gross domestic product (GDP) grew 0.3% during January, after shrinking by 0.5% in December. This was a faster recovery than expected and a firm move away from recession territory. The Royal Institute of Chartered Surveyors (RICS) house price balance, which measures the difference between the percentage…

Mood swings Bond and equity markets have been experiencing teenager-like mood swings for some time now. Investors have oscillated between optimism over the surprising resilience of consumer demand and relative company earnings stability, and pessimism that the same economic resilience will force central banks to keep raising rates for longer. Last week, focus shifted back…

Balancing acts Last week saw global equity markets give back some of February’s earlier gains. Even so, global equities have made a total return of around 5% in £-sterling terms since the start of the year. Over the past fortnight though, market participants have come to accept inflation – and in its wake interest rates…

Markets acknowledge the enduring stickiness of inflation After a surprisingly strong start to the year in January, February has brought market consolidation rather than a continued uptrend – despite the FTSE100 finally passing the psychologically important threshold of 8,000 points. In last week’s digest we wrote that the prevailing ‘Goldilocks’ market sentiment of not-too-hot (growth,…

A challenging week brings investors back down to earth For most of this year, investors have ran with the notion of a decline in longer-term inflation pressures, but they have been less convinced in recent days. As a result, bond and equity markets slipped back last week, despite the FTSE 100 reaching a new all-time…