With everything going on in the world, it’s no surprise that many investors are uncertain as to what path to take. David Kelly, the Chief Global Strategist at JPMorgan Asset Management, this week stated “the investment community in general is certainly uncertain and perhaps nervous, but it’s not obvious whether they should be more worried about recession or inflation”.
This week has seen amplified political debates with views about Trump sidling up with Putin and his statements on Ukraine raising doubts about the landscape in Europe. Whether this proves to be a masterstroke or folly remains to be seen. As we all know the rhetoric could change in a heartbeat, which makes second-guessing extremely difficult.
Someone asked me the other day about the difference in the economic outlook between the UK and the US. A tough one to answer because there are so many variables on both sides of the pond, especially now with the Ukraine situation and tariffs. However, below I provide views on the outlook for the two economies.
Central to any outlook is what unfolds on the tariff front. I thought this week I would share with you JPMorgan’s summary of the three broad potential scenarios regarding Trump’s tariff policies and their implications.
In the meantime, it’s European financials which are leading the equity charge. This has followed through for European indices, despite the negative news flow and fears over tariffs. European stocks have outperformed the US for the first time in a decade.
As promised last week, we take a look at India, where stock markets have plummeted in recent weeks. Why are the Indian markets falling when most other markets are rising?
On this week’s agenda:
- A weakening UK economy, or not?
- What will happen in the US?
- Tariffs: three broad potential scenarios
- Europe post strong gains
- German confidence improves
- Indian market at odds with other geographies
- Summary
A weakening UK economy, or not?
The UK’s consumer confidence appears to be weakening in the short-term according to the GfK consumer expectations gauge, just as inflation figures have come in at a ten-month high of 3%. This certainly poses a challenge to the Bank of England (BoE) regarding interest rates with the economy being so sluggish. It is likely that interest rates will still fall but at a slower rate. The markets are now pricing in two more rate cuts this year.
Further bad news this morning as the UK Budget surplus for January fell short of expectations. Interestingly though, the public sector was in surplus in January which is the highest level it’s seen since 1993 according to the Office of National Statistics.
Good news in many ways but the government is being encouraged to spend more on defence which will present challenges to the public finances.
Continues…
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