Mixed news as ever which has manifested in continued uncertainty, although there are some encouraging signs as the inflationary cycle moves into another phase. Even UK banks have lowered their fixed rate mortgage deals!
More about the UK later, but for the bulk of this update I thought it would be useful to summarise an article in ft.com published on 4th August. It is focused purely on the US, but I thought parts of the article worth sharing because it highlights the dichotomy for investment markets across the developed world. Recognising that this year, selected US equity indices have recovered strongly because of a handful of technology stocks. The article was written by Ethan Wu.
Here is this week’s agenda:
Are US stock bulls right to be optimistic?
- The last 18 months
- What’s happened so far in 2023
- So, is it time to buy US stocks?
- Time to buy bonds?
Then we’ll move on to:
- Encouraging US inflation data
- UK mortgage rates falling
- The UK economy surprises
- Is the UK a good place to invest?
- Weaker earnings could be good news
- Summary and comment from Blue Sky
Are US stock bulls right to be optimistic?
(Synopsis of article in FT.com)
The last 18 months
The year 2022 was agonising for US stocks. They fell in a relentless way. Now we are seeing the same process in reverse. In 2023, stocks have all but erased the past year’s losses and the S&P 500 is close, in valuation terms, to its pandemic summit.
Bears are in retreat today, and investors increasingly think a new bull market is being born. Yet full-throated bullishness is hard to find on Wall Street. “Time to get some worry beads?” asks Ed Yardeni, the veteran strategist, despite his call that the market will rise another 15% this year.
Many rallies inspire doubt at first, but this one is seen as especially uncertain. Inflation is still a threat. Interest rates are still rising. US valuations are far from cheap and recession risk, though it has dwindled, remains serious.
Corporate profits peaked a year ago and may struggle to grow again. Most importantly, equities now face real competition from bonds and cash. Can the budding US stock rally survive?
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