Should the Bank of England raise rates?

The Governor has warned us that a rate rise could happen soon. Markets have duly priced in an increase. The pound rallied strongly against the dollar, partly on that interest rate expectation. UK ten year rates and other longer term bond yields have adjusted upwards. The problem is that the economy is slowing. Treasury policy … Continue reading “Should the Bank of England raise rates?”

With the German election over, it’s time to focus on Europe’s growth opportunities

As expected, Angela Merkel has emerged as the victor in the German elections with her centre-right CDU/CSU bloc winning 33% of Sunday’s vote. The centre-left SPD took 20.5% and has said it will go into opposition. The dominant parties in Germany remain pro-EU although the far-right AfD won a higher-than-expected 12.6% of the vote. Negotiations … Continue reading “With the German election over, it’s time to focus on Europe’s growth opportunities”

Currency wars

It’s been a strange world for currencies as well as for bonds and interest rates since the western crash. Countries and central banks that used to worry about their currencies falling too much have all seemed to welcome weakness in their counters, hoping that will stimulate exports and allow a bit more inflation. Four of … Continue reading “Currency wars”

Progress of Europe’s banks may mark a turning point

We crave turning points.  As we mark five years since European Central Bank (ECB) President Mario Draghi’s “whatever it takes” speech — which crushed government and corporate bond spreads and contributed towards an 80% rally in eurozone stocks — are we on the cusp of another inflection? The eurozone has just enjoyed its best quarter … Continue reading “Progress of Europe’s banks may mark a turning point”

Fed leaves rates on hold and balance sheet reduction is coming soon

No surprises from the US Federal Reserve (Fed) with interest rates being left unchanged at the meeting last Wednesday. The statement contained some tweaks in wording with job gains now upgraded to “solid” and inflation is noted as “running below 2%”. Meanwhile, balance sheet reduction (the unwinding of quantitative easing) is now expected to take … Continue reading “Fed leaves rates on hold and balance sheet reduction is coming soon”

UK election: what a hung parliament means for markets

Following the surprise UK general election result, Schroders’ Alix Stewart,  David Docherty & Azad Zangana, consider the implications for the economy and markets.   The UK general election has resulted in a hung parliament, with no party commanding an overall majority. The Conservatives have emerged as the largest party and will likely seek to form … Continue reading “UK election: what a hung parliament means for markets”

Why we are still optimistic

When we sat down this week to review world markets and world economies the surprising thing was how few surprises there have been so far this year. We expected the euro to survive its brushes with mortality in the Dutch and French elections. It has done so. We like many have forecast reasonable growth of … Continue reading “Why we are still optimistic”

Is populism good for markets?

Populist policies appear good for markets, given the performance of equities following the Brexit and Donald Trump votes. However, we would note that the conditions for a rally (dovish signals from the Federal Reserve (Fed) and signs of a global recovery) were already falling into place last summer, before either of these two events took … Continue reading “Is populism good for markets?”

How far will inflation and interest rates rise?

In February the US inflation rate as measured by the CPI hit 2.7%. In the UK the rate reached 2.3%. The US dollar had strengthened over the previous year, whilst the pound had weakened. Both economies were affected by rising oil and other commodity prices. In the USA the arrival of higher inflation led to … Continue reading “How far will inflation and interest rates rise?”

What happens when rates go up?

A look at the implications of rising interest rates in the US. The US Federal Reserve has begun the painstaking process of raising interest rates, up to 0.5% to 0.75% in December, and has signalled 2017 will contain more of the same. We believe that strong fundamentals support the idea that the US stands to … Continue reading “What happens when rates go up?”

Market predictions for 2017

After a turbulent and unpredictable 2016, Charles Stanley’s Chief Investment Officer Jon Cunliffe takes a look at what could be in store for global markets in the year ahead. If there is one lesson to learn from 2016, it is to expect the unexpected. Britain’s vote to leave the European Union and the election win … Continue reading “Market predictions for 2017”

Why 2017 UK inflation fears are overdone

UK inflation in November came in higher than expected, but we think that concerns over a damaging rise in prices over the next 12-18 months are overdone. On the face of it a sharp rise in inflation looks likely, with worrying implications.  UK imports account for 30% of GDP and trade-weighted Sterling is 15% lower … Continue reading “Why 2017 UK inflation fears are overdone”

Will the UK consumer keep spending?

There have been alarms put round that the UK will witness a big squeeze on real incomes, leading to a reduction in consumer demand. The argument goes that the devaluation of the pound will cause substantial price increase, which will eat into wage increases and cause a fall in real incomes and spending power. The … Continue reading “Will the UK consumer keep spending?”