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”

When smooth waters cause ripples

It is proving to be a healthy quarter of results for US banks and the outlook is fine, regardless of what might or might not happen about regulation. The banks have decent economic growth to thank for much of their own health. Higher interest rates have been good for bank lending and net interest margins … Continue reading “When smooth waters cause ripples”

The Republicans fall out and the dollar weakens

One of the surprises for markets this year has been the weakness of the dollar. Last year, investors built up large speculative positions expecting the dollar to go better. The US was beginning to increase its interest rates and would in due course reduce its stockpile of government bonds held by the Fed. As more … Continue reading “The Republicans fall out and the dollar weakens”

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?”

The UK economy as pictured in the Budget

The UK budget will be remembered for the controversy over a proposed increase in National Insurance Contributions for the self-employed. This measure is designed to raise just £645m or less than 0.1% of total revenues in 2019-20.   Instead it was notable for the large movements of money brought about by changes in forecast. Where … Continue reading “The UK economy as pictured in the Budget”

Living with Mr Trump

Stock markets have been in love with Mr Trump the great reflator. They look forward to his promised tax cuts for individuals and companies. They want his increased spending on infrastructure. They also quite admire the way he persuades big corporations to put America first and invest more of their corporate cash. They do not … Continue reading “Living with Mr Trump”

US Presidential election takes centre stage

The imminent Presidential election continued to absorb much of the limelight in the US. On balance, investors appear to believe that Hillary Clinton will emerge victorious, although the House of Representatives is expected to remain in Republican hands, albeit with a lower majority. Nevertheless, in a close-run – and often bad-tempered – election campaign, investors … Continue reading “US Presidential election takes centre stage”

US election: uncertain predictions and market risks

What Brexit teaches us about trusting betting exchanges and polls in the run-up to the US election, and some of the market implications of the possible results. Betting exchanges vs polls We learned from the Scottish referendum that betting exchanges were a better predictor of a particular voting outcome than the official polls. The Brexit … Continue reading “US election: uncertain predictions and market risks”

The US Federal Reserve – Birds of a Feather

What do you get when you cross a hawk with a dove? A fair amount of confusion, if the US Federal Reserve (the Fed) is anything to go by. At this year’s Jackson Hole gathering of the world’s central bankers, Fed Chair Janet Yellen declared that ‘the case for an increase in the federal funds … Continue reading “The US Federal Reserve – Birds of a Feather”

Strong jobs data fuel US rate rise expectations

US Briefing – The Dow Jones Industrial Average Index , the S&P 500 Index and the Nasdaq Index all reached new highs during August. Over the month as a whole, the Dow Jones Industrial Average Index fell by 0.2% and the S&P 500 Index edged 0.1% lower, while the Nasdaq Index rose by 1%. The … Continue reading “Strong jobs data fuel US rate rise expectations”

US market review – July 2016

US equity indices rebounded in July after a June that was marred by the fallout from the UK’s Brexit vote. Investors drew encouragement from some relatively strong corporate earnings releases, and both the Dow Jones Industrial Average Index and the S&P 500 Index both hit new all-time highs during the month. During July, the Dow … Continue reading “US market review – July 2016”

Strong demand for defensive and high-yielding stocks

Global markets experienced their worst-ever two-day loss in the wake of the UK’s decision to quit the European Union (EU), losing a record US$3.01 trillion, according to S&P Dow Jones Indices. Nevertheless, the leading mainstream US equity indices managed to rebound from sharp initial losses to end the month in marginally positive territory. The Dow … Continue reading “Strong demand for defensive and high-yielding stocks”

Will US rates rise in June?

The prospect of higher interest rates absorbed a sizeable proportion of investors’ attention in the US during May. The minutes from the Federal Open Market Committee’s (FOMC’s) April meeting fuelled speculation that policymakers might move to tighten interest rates as early as June, as long as economic data – domestic and external – remain supportive. … Continue reading “Will US rates rise in June?”