Week ending 16 August 2024
A better outlook for markets and inflation: global equities bounce back, rising significantly in the last ten days.
Weekly Market Commentary
Week ending 16 August
US inflation data was released this week: reaching a new low not seen since 2021.
Positive news for UK economy: strong growth seen across Q2.
Welcome to our weekly market update. Our focus is on providing clear, concise insights into stock and bond market movements and the broader economic landscape. The views expressed here are subject to change without notice and we can’t accept any liability for any loss arising directly or indirectly from any use of it. This is for your information only. It is not a recommendation or advice, if you’re unsure about anything please speak to your financial adviser.
Market Review
Positive economic data was released this week – there’s now a more robust picture for markets and inflation is slowing towards target. Global equities rose 6.5% over the last ten days, recovering all of the losses seen two weeks ago. US government bond yields have also risen.
US consumer price inflation dropped below 3% in July for the first time since 2021.
Importantly there have been three months of benign inflation reports, clearing the way for the Fed to ease rates in September. On the back of this, investors have removed expectations for a 0.50% cut, now expecting a 0.25% reduction. This is good news for equities because a large cut could be interpreted as the Fed seeing cause for concern.
One of the triggers for the recent fall in markets was a jump in the US unemployment rate. Data released this week has calmed the concerns of slowdown with US retail sales rising higher than anticipated. Elsewhere, China’s new home prices fell in July at the fastest pace for nine years and UK data continues to show signs of recovery with the economy growing 0.6% in Q2 2024.
Outlook
Central banks are warming to the idea of rate cuts. The Fed hinted that its first rate cut could come in September, markets now assign a 100% probability of a rate cut in September. Investors and central banks alike continue to focus on key data points that could provide insight into the relative health of economies, while corporate earnings will be in focus as well.
Chart of the Week
The breakdown of UK inflation. This chart shows the breakdown of UK inflation and how it has changed over recent periods. UK inflation data released this week showed prices rose less than expected, at 2.2%, partly
because Services inflation fell. A decline in Services inflation is positive – it’s proven the stickiest component within inflation. This is an encouraging signal for the Bank of England and means they could cut interest rates by more later in the year.
What This Means for You
With the latest updates seen across the globe, there’s continued evidence that maintaining a well-diversified, long-term thinking to your investment approach rather than reacting to market swings is key. By staying committed to carefully considered plans, investors can navigate through periods of volatility and uncertainty.
Has provided the commentary within this document.
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NOTE THE FOLLOWING
This guide is for general information and is not intended to address your personal and financial requirements and should not be deemed or treated as constituting financial advice. Nor does this guide constitute tax or legal advice and should not be relied upon as such. Tax treatment of investments and legal advice depends on the individual circumstances of each client and may be subject to change in the future. For further guidance on the matters discussed in this guide please speak to Shane Fox, who is a regulated financial adviser. Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance.
SAMANTHA HAGON