Latest inflation and unemployment data both indicate the US economy is slowing but maybe not enough for the Fed to delay another 0.25% rate hike in May. CPI data released on Tuesday showed that core prices increased but US inflation actually slowed more than expected in March and PPI data showed that US Producer Prices fell 0.5% mom in March, the most in nearly three Years.
Last week investors were weighing that data against the minutes of the latest Fed meeting in March which showed members predicting a recession in the US and agreeing that a further rate increase would be appropriate in the fight to get inflation back to the 2% target.
Thomas Barkin, Richmond Fed President, suggested that interest rates would have to stay higher for longer; this caused a setback mid-week but stocks recovered and ended the week on a strong note with the S&P500 reaching its highest level since mid-February. The Energy sector out-performed again with Crude Oil having another strong week.
Major US Banks including Citibank, Wells Fargo and JP Morgan all reported First Quarter earnings last week with investors concerned they would miss forecasts – as it turned out all three reported better-than-expected figures. Bank of America, Morgan Stanley and Goldman Sachs are all reporting this coming week.
In the UK, data showed the economy flat-lined in February – worse than the slight increase forecasted; and IMF projections also released last week showed Britain at the bottom of its economic growth projections for 2023. Better news today (Monday) though from Deloitte’s quarterly survey of CFOs which suggested sentiment had showed a significant improvement since the start of the year.
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.’