The latest Weekly Market Views from our managed portfolio service team covers market moves, the latest data releases and what to watch.
For information purposes only. The views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
In brief
- Last Friday’s US employment report points to slowing economic growth.
- Markets optimistic of economic backdrop as equities and bonds rally.
Fake news
A week that started with US jobs data, middled with cats and dogs, and finished with central bank policy taught us a lot didn’t it?!
Last week ended with the US adding 142,000 new jobs, well below the 165,000 expected. It was however, the prior month’s number, which initially had been blamed on weather, which was revised even lower to 89,000 that soured equity markets on Friday week. Markets continue to question whether central banks are going to be too slow to cut rates, and in the coming weeks whether the size of the rate cuts will be as expected.
Equity markets staged a recovery this week as the US Core Inflation came in above expectations at 0.3% month on month, as transportation and shelter costs rose more than expected – oh to be a Federal Reserve (FED) Governor! Is it possible to explain why markets rally when inflation is up?
This week it was the turn of the European Central Bank (ECB). An expected rate cut of 0.25% came through and European markets rallied. The magic 0.25% is what participants will hope for. In the UK, a flat Gross Domestic Product (GDP) combined with weaker manufacturing did raise eyebrows. Yet the housing market, key for UK economic growth, rallied further as yields fell ahead of next week’s rate decision.
Politics in the US took centre-stage again this week. In the build up to the US election it’s difficult to know which party will succeed and what will be implemented. The first, and most likely only debate between Trump and Harris led to Democrats claiming victory. Trumps’ fake news continued as he covered cats and dogs, aliens and touched on migration. Yet the point that markets were hoping to be covered, yet wasn’t by either candidate, was the fiscal deficit. An issue which will become more of a worry as we get closer to the election.
For now Government bond markets, which signal confidence in the ability of a government to pay back borrowed money, rallied as lower interest rates were priced. This was supported by what looks to be a closely fought White House and Senate election, with slender majorities meaning plenty of challenges and checks for whoever triumphs.
Whilst global growth into 2025 may be quesitioned in the coming weeks, a sign of confidence is the oil price. It has stabalised at around $69 a barrel, which is comfort to many.
Looking ahead
Next week may well be one of the defining weeks for markets this year. Both the Bank of England and Federal Reserve will announce rate decisions, but how much of a reduction remains up for debate. The FED is the most important of course, with 0.25% expected and some probability of that being 0.5%. Ideally the Central bank does not want to meddle ahead of a general election, although it has two meetings before the election. It will be the forward guidance by the governor which could determine market moves more than just what the actual cut is.
