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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|The Bank of England’s monthly meeting in September will be closely watched.||Although the 4 September is when the Monetary Policy Committee announces its decision, the 17th day of the month is probably more important, as we get to see the minutes of the meeting. The tone of the debate, and more importantly the split in the votes may give a hint about the timing of an interest rate rise. Given the lack of significant data in August, we expect the committee to remain split at 2 votes in favour, 7 votes against.|
|The referendum on Scottish Independence takes place on 18 September.||Finally the time has arrived when Scotland gets to answer the question that the Clash posed over 20 years ago: “Should I stay or should I go?” Polls are indicating that Scotland will remain part of the UK, and we feel that a vote for independence would come as a significant shock to investors|
|GDP growth revision for the second quarter of 2014 was healthier than expected – boding well for the rest of the year.||An annualised growth rate of 4.2% in Q2 is good news for the US. Of particular interest is the rise in business investment as companies begin to invest their cash piles. Corporate profits were also high – suggesting that the equity run mentioned below could see fundamental support with earnings justifying share price rises.|
|The S&P 500 has finally breached 2000 (about two months later than we predicted back in April).||The first important inroad above 2000 has now been made (although it took 16 years to get there from the 1000 level first breached in 1998). Over the next month, some movement back and forth around the 2000 level is likely, as psychological impulses drive investors. However, by the end of September, the US index should be ready to continue rising to new highs.|
Europe ex UK
|The first round of Mr Draghi’s easing policy begins in September…||The Targeted Long-Term Refinancing Operations (TLTRO’s) are essentially a source of cheap credit for European banks – with the idea being that this then increases the amount of money lent to consumers, thus stimulating the economy. Expect many banks to take advantage of this, but the effect may not be felt immediately.|
|… but as the ECB has acknowledged, there are two sides to credit growth; demand has to be there as well as supply.||We are unlikely to see any action at the September meeting of the ECB, but they may be preparing the ground for some measures to try to create demand for credit – at the moment, businesses and consumers are unwilling to borrow any money, regardless of how cheap loans are becoming.|
|New Prime Minister Narendra Modi begins to make changes in India; starting with bank accounts for all. Only around 35% of India’s population has a bank account – but this number should begin to rise.||Mr Modi has ordered state-owned banks to begin opening accounts for some of the poorest in Indian society. This simple change should assist a much more significant long-term goal – the direct transfer of social welfare payments as opposed to government hand-outs of food and fuel. Change is coming to India – the world will soon sit up and take notice.|
|The religious war being waged in the Middle East by the IS organisation is going to be a more drawn out affair than initially hoped.||At present, the turmoil in Iraq and Syria has not affected investors. The most notable point has been the absence of a spike in the price of oil – now close to its 12-month low price at $103 per barrel. Something has eased the market – and that might well be shale, in the US, fully becoming a game-changer. Oil should stay below $110 during September.|
|Present Situation||Next Meeting||Expectation||Source|
|Bank of England||0.5%||4 September||No action||Click here|
|US Federal Reserve||0% – 0.25%||17 September||No action||Click here|
|European Central Bank||0.5%||4 September||No action||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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