Ahead of the Easter break there is plenty for investors to chew on aside from a crème egg. Up until now equity markets have reacted with indifference to any geopolitical uncertainties, alongside any other broader macro news good or bad. Equity indexes seem to be in something of a holding pattern. Some commentators consider this stability in the face of an uncertain geopolitical backdrop a sign of underlying strength to the equity market. It may also be that investors are getting immune to reacting to geopolitical risk, having endured it for many years.
The benchmark now for how other asset classes have been performing appears to be the election of Donald Trump. TV pundits refer to yields on US treasuries being back to the bottom of the trading range, established after the spike in yields post Trumps election. The yen is back to the level it was against the US dollar when Donald Trump was elected. The latest is the Vix index, at 15 is the highest it has been since Donald Trump was elected. The price of gold, or the investors teddy bear as some affectionally describe it, at $1270 an ounce has risen to almost the same level it was at the start of November 2016. One measure that remains materially higher than the point Donald Trump was elected is the S&P 500 index, by almost 10%.
There have been questions posed as to whether the world was beginning to tire of the Trump reflation trade or the “Trump bump”. Inflation expectations for the UK economy have been rising on the back of weaker sterling, and is forecast to climb higher as the impact of the currency continues to impact import prices. On Tuesday, latest inflation figures were released today for the UK economy from the Office for National Statistics. Year on year inflation remained steady at 2.3%, core inflation excluding food and oil fell slightly from the previous month’s result. Frank Investments was invited to co-host Shareradio’s morning business show with ex BBC reporter Nigel Cassidy. Appearing as a guest was Howard Archer Chief European Economist at Markit Research, with his take on the outlook for retail sales and the and inflation for the UK economy. Below is a link to that interview, and what Mr Archer believes are the reasons why Mr Carney will not move until the middle of next year on UK interest rates.
Meanwhile looking ahead a little nervousness ahead of a long Easter break may not come a s a complete surprise.