Life under Labour: what is the macro background for the new Government, their likely budget plans and the impact on the economy?
I think the pessimism over the failure of US inflation to keep falling should reverse over the next few months. That should halt the steady decline in the scale of expected interest rate cuts across Europe, UK and US. Current expectations are 75 basis points (bp) off in Europe but only 50bp in the UK and even less in the US. That’s a dramatic change compared with the optimism we saw at the start of the year.
Rate cuts have preoccupied financial markets since the start of this year. Inching towards June and the first central bank is yet to blink. The US Federal Reserve had, until very recently, been expected to take the lead. A series of stronger US CPI readings in the first quarter, largely revolving around the stickiness of core services inflation, seems to have put paid to those expectations. The April CPI figure wasn’t as bad as feared but ‘shelter inflation’, known more universally as housing rental costs is still persistently high. Now Europe has pushed forward as the more likely first contender, with June cuts being pencilled in.
Decarbonising Steel: redefining the value chain and the role of iron ore miners
The transportation sector has a significant impact on global emissions, but technology innovations, policy changes and shifting behaviours can reduce this. How are the different modes progressing?
After an exceptional 2022, the UK reverted to recent type with a big underperformance in 2023. With money continuing to disappear from the market, two potential catalysts for change have emerged
With real rates rising as inflation falls, we explain why central banks should consider cutting interest rates soon.
The CT UK Social Bond Fund has pioneered impact investing for fixed income, through investments that deliver positive social outcomes and a financial return consistent with the risk profile of the broad UK investment grade credit market. We talk to portfolio manager Tammie Tang.
Political noise is a distraction in any market environment but in an election year the clamour is heightened. So, in February we had one of our holdings, Nat West Bank, reporting its biggest annual profit since the 2007 financial crisis but in the days that followed seeing its share price fall on speculation of a possible windfall tax on the banking sector. As an investor, sometimes it feels like you can’t win.
After a challenging 2023 for equity investors holding anything other than the narrow band of large US stocks known as the Magnificent 7, there was hope at the end of the year that better times were on their way. While the risk of recessions lingered (in February the UK was confirmed to have slipped into a technical recession in Q4 2023), inflation was coming down and bond yields were falling in the expectation that interest rate cuts were just around the corner. But alas, investors jumped the gun as January saw sentiment sour and equities reverse as one central banker after another extinguished early rate cut hopes.
A favourite bedtime story for my son is Eric Carle’s The Very Hungry Caterpillar. The larvae eats its way through many fruits and sugary treats day by day, before blooming into a beautiful butterfly. Given my son’s tendency to eat all snacks placed in front of him, I sometimes wonder if the story’s words are in fact a memoir of his day! This theme of sluggish growth before gorging its way to beauty is somewhat reminiscent of the current UK equity market.
Interest rates, growth and financial markets
About 70% of world market capitalisation is now attributed to the ‘Magnificent Seven’ stocks1. Should investors be worried about this level of concentration?
Discussing the extent of cuts and the implications for markets?
We expect 2024 to outperform the current pessimistic economic forecasts but struggle to beat the optimism priced into equity markets.
Talk of early 2024 US rate cuts, which spurred a strong rally in bonds and equities globally, has seen a significant reversal.
The growth in the breadth and depth of the social bond market is impressive, but there's still more to come.
Inflation is moving in the right direction and the US is seemingly at or near peak interest rates. What about the UK and Europe?
The Bank of England is suggesting inflation is becoming embedded in the UK so rates may stay high for longer; possibly at their current level for two years. Could it be that the Bank has got it wrong? Steven Bell, Chief Economist EMEA, explains why he thinks this may be the case.
Against the difficult backdrop of high inflation and rising interest rates, the portfolio manager discusses some new entrants and disposals from the portfolio.