Please see today’s Daily Investment Bulletin from Brooks Macdonald received this morning, 15/02/2024.
What has happened
Yesterday saw a more subdued trading session as the market attempted to recover from the Consumer Price Index (CPI) driven sell-off on Tuesday. This rebound aligns with the prevailing belief that the broader trend of disinflation is still in play, and the orderly nature of the market’s pullback, which lacked any signs of panic selling, indicates that investors are still optimistic, focusing on a potentially less aggressive Federal Reserve pivot and a more robust US economic outlook.
UK GDP
The UK concluded 2023 in a recession, but the emphasis is now on recovery prospects. The latest UK Gross Domestic Product (GDP) figures revealed a 0.3% contraction in the fourth quarter, which was more severe than the 0.1% decline anticipated by analysts and followed a 0.1% decrease in the third quarter. Despite this, the economy is estimated to have grown by 0.1% compared to the previous year. The Governor of the Bank of England, Andrew Bailey, has pointed to more positive signals from forward-looking indicators, such as Purchasing Managers’ Indexes (PMIs), as well as rising consumer confidence and business sentiment.
What does Brooks Macdonald think
In light of the lower-than-expected inflation figures and the contracting economy, there is mounting pressure on the BoE to consider reducing interest rates. During a recent session with UK lawmakers, Governor Bailey maintained a cautious stance, noting that inflation in the services sector and wage growth remain concerningly high. The probability of a 25 basis point rate cut by June, as inferred from market data, is now over 50%, and the market anticipates roughly three rate cuts by the end of the year.
Bloomberg as at 15/02/2024. TR denotes Net Total Return
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Charlotte Clarke
15/02/2024