The Federal Reserve has a new Chair and it has certainly not been business as usual. For the first time in over 3 years, the Federal Funds rate was raised by 0.25% to a target range of 3.75% – 4.00%. New Chairman, Kevin Warsh, has staked his reputation on getting inflation back to the 2%…
We continue to live in interesting times and the United States remains centre stage. It appears to have secured some kind of truce with Iran and while the chances of it holding are open to question, there is no doubting its effect on the price of oil which has fallen more than 25% in short…
If the start of 2026 posed numerous questions for investors, the end of the first quarter has done little to answer them. The obvious change is the situation in the Persian Gulf. The joint Israeli-U.S. attack on Iran has seriously de-stabilised the region, even drawing the tourist meccas of Dubai and Abu Dhabi into the…
The origin of the phrase ‘may you live in interesting times’ is disputed but at present, there can be no doubt that we are. The U.S. removal of the Venezuelan president illustrates the geopolitical status quo has well and truly been upended. Trump’s assertion that Maduro’s ‘narco terrorism’ is the reason for his arrest is…
If the first quarter of 2025 was a step into the unknown, the second quarter has proven even more so. On/off tariffs remain part of the U.S. president’s arsenal, but now they’ve been joined by Tomahawk missiles. An Israeli strike on Iran was always a possibility, but direct U.S. involvement has brought another dimension. While…
It has been an intriguing first quarter of 2025. As ever, we live in interesting times but if there have been general global themes, they are inflation remaining a little sticky, GDP growth jammed in low gear and rate cuts somewhat conspicuous by their absence. The price of gold also touched all time highs. Its…
Welcome to 2025; we have a relatively new government in the U.K. and a freshly minted administration in the U.S. As for the E.U., it seems likely that political issues will only aggravate obvious economic pressures. This is particularly relevant in Germany, its manufacturing powerhouse, which increasingly looks bereft of both political leadership and economic…
Does the election of Donald Trump change the investing landscape? Some expect it to but we’d be very surprised if Trump’s eclectic mix of tariffs and tax cuts radically changes America’s course. The former is inflationary and risks tit for tat reprisals. The latter might work if federal debt wasn’t $36tn, rising at $3bn per…
November will see rate decisions from both the U.S. Federal Reserve and the Bank of England. In the wake of relatively benign inflation data, interest rate reductions are almost a foregone conclusion. The European Central Bank cut by another 0.25% on 17th October. The background is clearly disinflationary. UK inflation at the CPI level…
It was no particular surprise to see the Federal Reserve cut its benchmark interest rate by half a percentage point to a range of 4.75% – 5.0%. Of the 12 voting members, only one demurred and even they voted for a quarter point reduction. Chair Powell noted “this reflects our growing confidence that with an…
September will see interest rate decisions from the U.S. Federal Reserve, Bank of England and the European Central Bank. It is probably fair to say the majority of commentators are expecting rate cuts and, theoretically, the latter always enhances the value of equities. However, rate cuts at this juncture would imply a question mark over…
It has been a very busy few weeks. The UK has a new government, intent on ‘growing the economy’. President Biden announced he was suspending his 2024 re-election campaign in the wake of mounting pressure from within the Democratic Party after a series of gaffes had seriously damaged his credibility. Perhaps the only real surprise…
The U.S. Federal Reserve kept its key interest rate unchanged and guided that just one reduction might be expected before the end of 2024. It added that it believes the long run interest rate (however one defines such a number) is higher than previously thought. Not that long ago, there was realistic chatter of 5…
We have now entered territory where, if rate cuts are realistic, the data will support it. In both the U.K. and U.S., September reductions are increasingly being thought of as probable rather than possible. That said, having missed inflation targets for years via inaccurate forecasting, central banks carry a burden their battered credibility will struggle…
Wishful thinking is a poor replacement for that of the critical variety. Not too long ago, investors were expecting the U.S. Federal Reserve to deliver 5 rate cuts this year. Now, that number is considerably less. But then, it’s hardly surprising when U.S. core annual inflation for March was unchanged at 3.8%, exactly the same…
Markets continue hoping that rate cuts are close while central banks remain happy to oblige them, without actually delivering the goods. Fed chairman, Jay Powell, said it was not far from gaining confidence that inflation is trending to target and that cuts would likely be appropriate later this year. Not for the first time, the…
The U.S. Federal Reserve maintained interest rates at a 23 year high of 5.25% – 5.50%. However, Chairman Jerome Powell didn’t think it likely easing would commence in March, as many assumed previously. The Bank of England’s statement was not dissimilar in tone as it maintained its benchmark rate of 5.25%. It was the same…
Stock markets have reacted badly to inflation figures from the U.K., U.S. and Eurozone. We’ve commented previously about the groupthink that now infests central banks and policy makers, in general. A cozy consensus was emerging that falling inflation would pave the way for rate cuts but inflation, while sharply lower over the past 12 months,…
12 months ago, Federal Reserve Chairman Jay Powell, noted “The question of when to moderate the pace of increases is much less important than the question of how high and how long to keep monetary policy restrictive”. At the time, U.S., UK and Eurozone rates were 4%, 3% and 2.5% respectively. After their December 2023…
At its November meeting, the U.S. Federal Reserve maintained interest rates within a 5.25% – 5.50% range. The Bank of England did likewise, keeping its key rate at 5.25% while the European Central Bank (ECB) also opted to maintain the status quo at 4.0%. Not for the first time, we are left wondering why they…
Will interest rates stay higher for longer? The rise in global bond yields suggests that’s the way investors are leaning. Central banks, having been wholly ignorant of inflationary dangers, now have a serious credibility problem with regard to getting it back under control. Their only remaining policy option is to hike interest rates which is…
Ex the United States, the global economy increasingly looks stuck in a low growth orbit and even the U.S. cannot continue deficit spending 8% of its annual gross domestic product without serious consequences. One may conclude the Federal Reserve’s hiking of interest rates from virtually zero to more than 5%, over an 18 month period,…
The Bank of England (B of E), U.S. Federal Reserve (Fed) and European Central Bank (ECB) all raised benchmark rates by 0.25% in order to tame inflation that remains substantially above target in all three territories. In the B of E’s case, it was the 14th consecutive increase, a damning indictment of its ineptitude by…
Federal Reserve (Fed) minutes from its last meeting suggested interest rates were likely to rise further in 2023 although at a slower pace. After 10 consecutive increases, June witnessed a pause in tightening. In the Eurozone, service and manufacturing output weakened while its strongest economy, Germany, entered recession. China continued to send mixed messages but…
Was it a surprise the U.S. debt ceiling was raised? Of course not; there was only going to be one ending to this theatrical stand off and Biden was always going to get his money. Of course, the real issue is when will the U.S. (and the Western world in general) get its house in…
The Bank of England raised base rate by another quarter of a point to 4.5%, representing the 12th consecutive increase and a damning indictment of its failure to conduct competent monetary policy. The 0.25% uplift emulated the actions of both the U.S. Federal Reserve and European Central Bank although their benchmark rates are now 5%…
For the second month in a row, UK CPI inflation has been worse than expected and currently stands in double digits. The Bank of England noted the path of inflation may be bumpier than expected in the short term but is likely to fall from thereon. We suspect it is correct but then, the Bank…
Eurozone inflation was slightly higher than anticipated in February but it was the increase in core inflation (excluding food and energy) that caught the eye. Now, one may conclude that food and energy, although volatile, are very much ‘core’ but leaving that argument aside, if the price of everything else is still rising (at a…
Inflation looks to be moderating but the rate increases keep coming. The Federal Reserve increased U.S. rates by 0.25% to a range of 4.5% – 4.75% while the European Central Banks and Bank of England raised by 0.5% to 2.5% and 4.0%, respectively. All still have base borrowing costs meaningfully below their present rates of…
Remember last year, central banks were often using the word ‘transitory’? It’s not a word we hear, now. 2022 was the year when the sheer incompetence of modern day central banking became all too obvious. Having held the cost of money at close to zero for well over a decade, economic reality crashed through the…
According to the Organisation for Economic Co-operation and Development (OECD), the world will face a ‘significant growth slowdown next year but will avoid a global recession’. We suspect this will prove as accurate as most OECD forecasts, which is not very accurate at all. It is our belief that it is close to impossible for…
Reversion to reality continues. Last month, the US Federal Reserve, the European Central Bank and the Bank of England all raised rates by 0.75%. After more than a decade of nonsense, all are now perfectly synchronised. Is this because it is so obviously the right thing to do or are the latter two so inept…
Interest rates keep increasing, inflation keeps rising. The monetary policies of the last decade and a half are now being revealed for the experiments they truly were. As baseball legend, Yogi Berra, a man famous for colloquial expressions lacking in absolute logic yet simultaneously carrying more than a grain of truth, didn’t say but might…
The current economic mess, the creation of all central banks over the past decade, is starting to be unwound. Raging inflation has laid bare just how incompetent the guardians of our monetary systems have been. Consequently, after providing virtually free money for years, they are now aggressively raising interest rates in order to control runaway prices.…
If there was any doubt regarding how inept, gullible and arrogant the Bank of England (B of E) is, it came with its decision to raise interest rates by 0.5% to 1.75%. It’s the largest rise in 27 years, which sounds dramatic but against CPI (Consumer Price Index) inflation of 9.4%, it’s akin to calling…
From an economic perspective, it’s difficult to argue there has been any improvement over recent weeks. On the contrary, global inflation continues to rise, as do interest rates while in the UK, waves of industrial action now appear a formality. Meanwhile, Putin’s forces continue their assault on Eastern Ukraine, meaning little respite for the prices…
Markets have generally weakened as investors continue to absorb a plethora of bad news. Despite expecting inflation to be ‘transitory’, all major central banks are now not only tightening monetary policy but signalling that further rate rises are embedded in their thinking. It’s a pity their hopeless misreading of inflation has resulted in such a…
Markets are now reflecting multiple concerns. February witnessed the shock of a full scale Russian invasion of Ukraine, rather than a Donbas land grab mirroring Putin’s previous tactics in North Ossetia, Abkhazia and Crimea. Due to Ukrainian resistance, Western assistance and poor Russian tactics, Putin’s ambitions have subsequently been clipped out of necessity. However, the…
While the war (sorry, Special Operation) in Ukraine continues to take centre stage, there are signs that markets are starting to look beyond it, refocusing on economic matters. In the US, 10 year Treasury bonds currently yield 2.4% which offers precious little recompense when inflation stands at 8.5%. In the UK, 10 year Government bonds…
Ukraine continues to dominate headlines. As we write, it appears Russia’s initial tactics have failed and a combination of its frustration, incompetence and brutality hallmarks the next stage of this conflict. In 2000, the Chechen capital, Grozny, had suffered a greater degree of destruction than befell Dresden at the end of WWII, so Putin’s current…
As we write, it appears only a matter of time before Russia launches an all out offensive in Ukraine. Its initial campaign has clearly failed as increasingly absurd Kremlin comments and the facial expression of Sergei Shoigu (Defence Minister) neatly illustrate. It’s a bad career move to be the deliverer of bad news to Putin.…
World markets have done little since the turn of the year. Omicron was a potential fly in the ointment but fears it would lead to another wave of lockdowns have proven false. Of course, it’s only a matter of time before a new mutation arrives and so on. Whether this time next year we’ll be…
Another month, another Covid variant. To date, each new strain has caused less economic damage than its forerunner. Whether Omicron follows this pattern remains to be seen although anecdotal evidence suggests that while it appears more infectious, it is ultimately less dangerous to vulnerable patients. It is, of course, entirely predictable that the virus is…
Markets have shown little enthusiasm to break out of the narrow trading ranges established over recent months. The US Federal Reserve said it would begin tapering its monthly asset purchases to $105bn from $120bn, with another $15bn reduction this month. Note, it’s only reducing the amount of assets bought with resources conjured out of thin…
Markets continue to trade within narrow ranges. The reopening of economies has delivered a strange brew of supply chain issues, shortages, stuttering industrial production and inflation. Supply chain problems will eventually sort themselves, as will shortages but as we’ve said many times before, we doubt inflation will be quite so easy to fix, All major…
Not for the first time, this month we find ourselves writing something very similar to what was written the previous month and indeed, the months before that. Markets recognise economic recovery is clearly on the march but Covid-19 outbreaks (and variants thereof) together with higher inflation, temper optimism. If rising prices are indeed temporary, herd…
Markets remain range bound. Central banks continue to emphasise support (or is it endless subsidy?) despite economies reopening. On the other hand, Covid flareups are still happening and while the Biden administration’s chief medical officer, Dr Anthony Fauci, made it clear he didn’t expect a return to lockdowns, he commented that “things are going to…
Markets have generally traded within narrow ranges. On the one hand, the reopening of economies has provided added impetus to artificially subdued economic growth. On the other, rising inflation poses the question of what central banks are going to do about it. In the US, inflation is now running at 5.4% while in the UK…
Are we there yet? Those familiar with transporting children on long journeys will instantly recognise the question. But from an economic perspective, how close to ‘there’ are we in terms of returning to normality after Covid-19 laid waste? Sometimes, it seems very close indeed but then at others …. it seems to slip further away…
Equity markets have retained their poise. Lockdowns are, for the most part, being relaxed and while normality still looks a long way off, the move towards it is undeniable. In the UK, the economy is forecast to attain its pre pandemic peak by the middle of next year, aided greatly by forced saving delivering a…
Markets have remained strong, buoyed by vaccine programmes and potential paths out of lockdown assuming greater visibility. Having said that, with various geographical areas moving at different speeds and talk of third waves, there’s obviously a long way to go before anything resembling normality can resume. Economically, inflation and economic growth dominate discussion. Globally, growth…
World markets have, belatedly, started to consider the return of that mythical beast, inflation. Long considered extinct by many, it’s a species whose DNA looks eminently capable of resurrection in the ubiquitous economic laboratory experiments now being undertaken by just about every government and central bank. Stock markets are directly affected by bond markets because…
Equity markets remain perky, the result of global, wall to wall economic stimulus. This largesse now resembles a teenage party that’s out of control at the point when the parents return home. However, instead of calling a halt, they fetch another crate from the garage and join in. In the US, President Biden’s pandemic relief…
Global markets surged after the Democrats secured the U.S. Senate. With both houses now under their control, investors reacted in Pavlovian fashion, anticipating greater monetary stimulus alongside a more expansive fiscal agenda. We’ve said it before (and many times before that) but how more expansive can any of this get? Sovereign borrowing is close to…
Well, we have a deal with the EU. Proof, if it were needed, that whatever one might negotiate, a conclusion will only result once one side makes it clear the timescale for negotiation is not indefinite. A combination of several Covid-19 vaccines, the EU deal and promises of continued global economic stimulus have encouraged equity…
World markets soared on the news that Pfizer and BioNTech’s Covid-19 vaccine is 90% efficient (traditional flu jabs are around 50%). In addition, there are another 150 vaccines in development and 3,600 trials still being undertaken. It’s obviously great news although the organising of mammoth immunisation programmes means anything resembling normality is still some way…
We suggested a couple of months ago that relaxations of Covid-19 lockdowns would soon be reversed as inevitably, with the virus omnipresent, greater interaction would aggravate infection rates. We now face another national lockdown, representing a hammer blow to economic recovery. In our view, previous levels of output will take years to reclaim and the…
The numbers keep deteriorating. Japan’s economy contracted by 7.8% in the second quarter (versus the first quarter) as exports and consumer spending plummeted. Germany’s fell a record 10.1% while the EU average slumped by 11.9%. The US posted a 9.5% decline while the UK delivered an enormous 20.4% contraction, although this could yet be revised…
Are we there yet? Well, wherever we are going, the answer is ‘no’. Stock markets are mechanisms of prediction; arenas where millions of participants’ opinions are distilled into price movements. As a rule, the more uncertainty present, the greater the level of volatility. As markets grapple with when the world will return to some kind…
World stock markets appear to be sanguine regarding economic recovery post the initial shock of Covid-19. Of course, the latter hasn’t gone away and as the experience of Leicester illustrates, the release of lockdown can easily be reversed. Numerous cities around the world have taken similar action as the return to normality, inevitably, provides a…
Markets remain in capricious mood. Violent changes in sentiment have become common as share prices react to the latest economic news or central banks’ comments. As lockdowns ease, investors are optimistic that a ‘v’ shaped recovery will ensue. To a degree, this will be self-fulfilling as enterprises open for business once more and a significant…
Worldwide, the quarantine that has become strangely normal is starting to be relaxed. The economic damage is already immense and while comparisons with 2008/09 are understandable, what is now unfolding will be noticeably worse. At the time of writing, 15% of the U.S. workforce is unemployed and on some definitions, it is noticeably higher. The…
Unsurprisingly, global markets have remained volatile although they are now considerably higher than the lows reached in late March. Not that long ago, investors wondered when the next recession might strike. As the economic cycle had been artificially extended due to endless central bank intervention in the wake of the financial crisis, it was a…
What a difference a month makes. There is now no doubt we are in the midst of a global pandemic, the like of which no living person can recall. Originally, the fear was a global economic slowdown. Now, a deep worldwide recession is a certainty and the real fear is a resulting depression, the like…
It seems we live in extraordinary times. As if Brexit, US elections, impeachment and endless experimental monetary policies weren’t sufficient, we now have the Coronavirus to add to the mix. Numerous companies have already stated this is now having a material effect on trading within China and we have no doubt there will be more…
2019 was the best year for global equities since 2009. Sino-US trade tensions failed to escalate into a full blown trade war and while the world economy certainly slowed, it didn’t match the worst predictions. Markets were also supported by the US Federal Reserve’s decision to reduce rates three times. Of course, as the cost…
So, now we know. Mr Johnson’s electoral success puts paid to over 3 years of political logjam and the UK’s withdrawal from the EU can truly begin. Well, that’s the theory although one suspects sorting a trade deal will not be plain sailing. Anyway, we can perhaps now concentrate a little more upon economic matters…
