In our regular feature Seven Investment Management (7IM) look forward and assess what the month ahead might hold for the world’s largest economies.
Whether you are invested in the UK or overseas, in stocks and shares or fixed interest assets, read on to discover the latest insights from one of the UK’s most respected investment managers.
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|Bank of England interest rates are going nowhere for the time being.||Growth is promising, unemployment remains steady at around 7%, and inflation is bubbling along below 2%. Additionally, pressure from the government is easing, as politicians seem to be scoring points off one another, rather than focussing on monetary policy. None of these factors is likely to change in the next few months; Mark Carney shouldn’t have to make any policy changes.|
|Strong data trend to continue.||UK car sales hit a 10-year high in March – further consumption related data is also likely to be strong, as public confidence continues to build.|
|From one independence story to another – as opposed to Scotland leaving the UK, it is the UK’s position in Europe that is now grabbing headlines.||With Nigel Farage and Nick Clegg battling it out at the debating podium, media focus has returned to the UK’s relationship with the EU. The tone of the debate in the next few weeks is likely to make it clear that leaving would damage the UK economy rather than support it.|
|The US stock market keeps making new highs.||The S&P 500 should continue to extend its 5 year rally in this quarter. There is speculation that the market is overvalued, but it would take a genuinely dismal run of economic data to disrupt it. If news is benign, an index level of 2000 by the end of Q2 2014 could happen.|
|US payrolls data for March was ever so slightly under expectations.||There were 192,000 newly employed in March, vs. a forecast of 200,000. However, this kind of miss is more of a rounding error, as data is later revised. Further, this is exactly the kind of level needed to sustain growth. Expect retail sales and consumer sentiment to start picking up soon too.|
Europe ex UK
|Unsurprisingly, the ECB made no policy changes at its latest meeting. However, President Mario Draghi’s comments brought the possibility of future action into close relief.||Germany doesn’t like high inflation. This simple idea has been repeated over and again in an attempt to explain the ECB’s lack of monetary easing. However, with inflation in the Eurozone now at 0.5%, the risk of hyperinflation is pretty remote – in fact, deflation is more of a threat. Mr Draghi’s statement is worth repeating; “the Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation”. So far Mr Draghi has only needed words to control market sentiment – now; he has opened the door for action too. The next ECB meeting will be eagerly awaited.|
|Globally, there is a real buzz in the markets at the moment – with floods of new businesses looking to raise capital.||Business sentiment will continue to grow. Almost on a daily basis, companies are going public – although prices may be a bit high (some would say bubble-level on some of the unproven tech stocks), the overall wave creates a positive trend. Managers are seeing long term potential for growth, and the backlog from the financial crisis is clearing. Expect yet more IPO’s.|
|Russia is behaving, and should continue to do so.||Mr Putin seems to have emerged the victor in establishing a fragile equilibrium with the West. Russia will most likely keep Crimea, and only suffer minimal, superficial sanctions as long as it threatens no serious further territorial grabs.|
|Present Situation||Next Meeting||Expectation||Source|
|Bank of England||0.5%||10 April||No change in interest rates||Click here|
|US Federal Reserve||0% – 0.25%||30 April||No action on interest rates or tapering||Click here|
|European Central Bank||0.25%||8 May||An outside change of some monetary easing||Click here|
The views expressed in this document are for information only and do not constitute investment advice.
Before considering investments we recommend that you consult your adviser who can assess your personal circumstances and objectives.
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