Please see below, an article from Brooks Macdonald providing a brief analysis of the key factors currently affecting global investment markets. Received this morning – 20/03/2025:
What has happened
Equity markets rebounded on Wednesday, with the UK FTSE100 equity index notching up its sixth day of gains in a row, its best run since May last year. But it wasn’t until European markets had gone home for the day that investors really found their mojo with US equity markets on a tear – the bulls were back in force following US Federal Reserve (Fed) Chair Powell signalling that the Fed still sees room to cut interest rates later this year, judging any increase in inflation due to tariffs as only “transitory” – the US S&P500 equity index had its best Fed-day since July last year, the US Dow Jones equity index had its best Fed-day in a year.
US recession risks are “not high”
Referring to external forecasts, Fed Chair Powell yesterday said “a number of them have raised their possibility of a recession somewhat, but still at relatively moderate levels. They were extremely low. If you go back two months, people were saying that the likelihood of recession was extremely low … so it has moved up, but it’s not high”. Powell said that “the economy is strong overall” and added that “labour conditions are solid”. Providing useful context around recession fears, Powell pushed back – “there’s always an unconditional possibility of a recession; it might be broadly in the range of one in four at any time”.
Bank of Japan
The Bank of Japan (BoJ) left interest rates unchanged at its latest meeting yesterday, as expected. Instead, BoJ Governor Ueda focused on uncertainty around US President Trumps’ tariff plans. Ueda noted the impact was “difficult to judge” and that “tariffs could directly affect the economy and inflation … [but] there might be factors we may not find out until much later”.
What does Brooks Macdonald think
“The good ship Transitory” (as Fed Chair Powell called it in August last year) sails again – yesterday’s use of the word “transitory” by Powell was deliberate and comes despite the chequered history of that word in recent years. With interest rates left unchanged as expected, Powell roundly dismissed any fears that trade tariffs might lead to sustained inflation pressures – it suggests that should any economic growth weakness emerge later this year (although Powell said the risk of a US recession was “not high”), the Fed will not hold back in cutting interest rates. For investors, maybe there is still a Fed “put” after all.
Bloomberg as at 20/03/2025. TR denotes Net Total Return.
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Andrew Lloyd DipPFS
20th March 2025