Please see the below article from Brooks Macdonald, analysing the key factors currently affecting global investment markets, received this morning 14/11/2024:
What has happened
Equity markets saw little price movement overall on Wednesday. The US S&P500 equity index ended the day marginally up at +0.02%, while the pan-European STOXX600 equity index finished down at -0.13%, both in local currency price return terms. A timely reminder perhaps that investor expectations matter, while yesterday’s US consumer inflation data saw some underlying annualised stubbornness, markets seemed to be more relieved that it wasn’t worse.
US consumer inflation
The rate of US annual core Consumer Price Index inflation (core CPI, which excludes energy and food prices) came in at +3.3% for the second month running and in line with expectations. However, looking at the core CPI Month-on-Month (MoM) rate, that held at +0.3% for the third month in a row. That left core CPI three-month annualised inflation tracking at a rate of +3.6%, which is likely to be a lingering concern for the US Federal Reserve (Fed) as it strives to get inflation down to its 2% target.
A US Republican clean sweep
Following last week’s US election, we have finally got confirmation that the Republican party has held on to control of the House of Representatives (House). The latest House votes according to the Associated Press show Republicans have secured 218 of the 435 seats in the House (where 218 is the minimum for a majority), versus the Democrats on 208 seats, with 9 seats still left to be formally decided. That gives US president-elect Donald Trump and the Republican party a clean sweep control of the presidency as well as both chambers of Congress (the House and the Senate).
What does Brooks Macdonald think
Consumer inflation is unlikely to enjoy a smooth ride going forwards. Fed Chair Jerome Powell said as much last week – that inflation rates will probably have a “bumpy path over the next couple of years” before closing in on the Fed’s 2% target. However, with a new US economic policy agenda under Trump to look forward to, the risk is that inflation could be even more unpredictable which is not what policymakers or markets would like.
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Andrew Lloyd
14th November 2024