Equities fell again last week after the UK’s mini-budget 10 days ago sparked turmoil on the global markets.
The Pound fell to a record low against the US dollar, mortgage rates spiked and the Bank of England had to intervene with an emergency £65 billion measure to purchase long-dated UK government bonds and avert a meltdown in the bond market.
The mini-budget received unprecedented criticism from many quarters including the IMF and the Biden administration. A former member of the Bank of England MPC, Danny Blanchflower, said he had “never seen such raging incompetence”.
Under pressure, Prime Minister Liz Truss announced she has dropped the idea of cutting the top 45% rate of income tax for the UK’s highest earners. The yield on the 10-year Gilt has eased, falling back from 4.5% last week, a 14-year high. The Pound has rallied back.
The BoE intervention seems to have restored some order to global markets over the last few days. US government-bond yields which had been rising at their fastest pace in forty years have settled back – last week the US Treasury 10-year yield rose above 4% to the highest level since the global financial crisis.
The latest focus of concern for investors is Credit Suisse after reports that the Swiss Bank is in talks with major investors attempting to calm nerves over its financial health.
Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.
This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’