Making sense of this crazy world
Interest rates in the US fell by the expected 0.25% this week, but the accompanying statement suggests there is more to come. The reduction was largely baked into markets which remain supportive, despite the ongoing traumas and conflicts around the world.
Despite data points suggesting a slowdown in the US economy, it appears as though sentiment around a recessionary trade war has weakened. That’s good for markets.
Although there has been much talk around US technology stocks being expensive, some believe that it’s not the ‘tech stocks’ that cause concern in the US, but rather it’s the rest of the market which is starting to look a bit overpriced.
Prior to Trump’s state visit to the UK, one of his parting shots was to call for US companies to stop reporting quarterly results and instead report half-yearly. The argument here is that it will save companies money and allow those in charge to focus better on their business. This is a recurring trend after years of, arguably, overregulation in response to the financial crisis back in 2008-09.
In the UK, the big news is that big technology companies, including Microsoft, Google and Nvidia, have agreed to make multi-billion-pound commitments to build new AI infrastructure across the UK. A timely announcement, of course, with Donald Trump at Windsor Castle.
The Bank of England (BoE) kept rates unchanged, but, unlike the US, there is more doubt about any rate reductions due to stubborn inflation.
Following recent comments about the prospects for bonds, we’ll explore the landscape further. Investors remain underweight in fixed income assets and for good reason, but there are some compelling opportunities emerging.
We’ll then cast a glance at how equity market indices have performed over the last month.
There’s even a job opportunity at the end for those looking for work.
This week’s content:
- US interest rates fall, with more cuts expected this year
- Markets are now not factoring in a US recession
- Follow the earnings growth
- Big tech companies are to invest £150 billion in the UK
- Dash to cash in the UK
- Opportunities unfold in the bond landscape
- Market performance
- Summary
US interest rates fall, with more cuts expected this year
The Federal Reserve (Fed) cut the interest rate by 0.25% on Wednesday and has signalled further reductions ahead. Two more are expected. It’s the first rate cut this year.
The Fed has reacted to the slowing employment market rather than focusing on the rise in inflation resulting from tariffs. Employment data has indicated a sharp slowdown in new hirings.
No doubt Trump will take some credit for the reduction, having placed enormous pressure on the Fed Chair, although he was clamouring for a 0.5% cut. However, eleven of the central bank’s twelve members who set rates voted for a 0.25% reduction.
Continues…
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