A brief insight into the latest market dynamics and details of any changes occurring within our model portfolios.
Hurricane Irma, did indeed supercede the previous storms and wrought widespread devastation to the Caribbean and Florida. The clear up has begun and early reports from Goldman Sachs suggest that there will be an additional impact of reducing the US GDP by 0.8% in the 3rd quarter, with an estimated $300bn required to rebuild and replace the damage caused
Comments by Bank of England Governor; Mark Carney, late yesterday afternoon, confirmed that although interest rates were to be kept on hold at 0.25%, there were strong hints about a possible increase, earlier rather than later. The impact sent Sterling climbing 1% against the dollar immediately after the announcement. The comments came after news earlier in the week showed UK inflation rising to 2.9%, well outside the Bank of England’s 2% limit. Encouraging economic news was that UK unemployment fell by 1% to 4.3%
Weaker production, retail sales and state investment data from China impacted the Asian markets, which had been rising with tensions around North Korea appearing to subside.
Gary’s market comments in conjunction with our investment partners
LGT Vestra’s focus this week is entirely US centric.
Elaborating on the impact of hurricane Irma; is likely to dent in the US jobs market, affect retail sales and impact levels of manufacturing in the catastrophe area. The impact of the hurricane will probably mean that any further US interest rate rises will be put off until next year as the Federal Reserve waits to assess the damage to the economy and consumer before putting both under further pressure by increasing the cost of borrowing.
The 10 year US Treasury yield has fallen to 2% from 2.5% as investors have rotated into ‘risk off mode’ following hurricane Irma and recent geopolitical events in North Korea. Some consolation for the economy, however, will be the planned reinvestment into the affected areas through rebuilding and infrastructure spending which could go some way to boosting US GDP in the first few quarters of 2018.
LGT Vestra still remain very positive on the US
7IM remains underweight in UK equities given that the outlook remains uncertain. The uncertainty covers data around economic growth, which appears to be slowing
The likelihood of a softer Brexit appears to be gaining ground and as a result, Sterling’s value could spike, which in turn would cause the value of company earnings to drop as they are largely denominated in foreign currencies. This would also have a negative impact on the FTSE100. 7IM invests in UK stocks through its ‘Equity Value Strategy’, which offers an alternative approach allowing 7IM to make quick tactical changes to asset allocation if needed.
Sources: LGT Vestra and 7IM