Enjoy Easter, the weather forecast is improving fingers crossed

Global stock indices have retained most of their recent gains, even with the uncertainty surrounding tariffs still affecting investor sentiment. According to the latest Merrill Lynch Fund Manager Survey, the consensus amongst professional investors is that the uncertainty around tariffs is the most significant risk to stocks at present, bringing with it the potential for a trade war leading to a global recession. There are also concerns that tariffs will lead to higher prices and the Fed having to raise rates, not lower them.  Having said that, looking at the break-even inflation rate derived from 10-year Treasury bonds, the market does not appear to be pricing in a spike in long-term inflation expectations at present.

 Yesterday, the so-called “death cross” appeared in the S&P 500 for those who like technical analysis. This is when the 50-day moving average moves below the 200-day average. This cross is seen as a bearish signal, reflecting short-term weakness overtaking long-term momentum. The last time this happened was in 2022; the index fell by around 25%. Before we get too bearish regarding these technical signals, 80% of the time, markets are higher 12 months later. As someone said, shouting at screens and charts is the last bastion of a desperate trader. Markets never like uncertainty, and the current uncertainty should not give investors too much confidence to go chasing rallies. The US dollar remains weak, and the spike in 10-year US treasury yields, which forced Trump into something of a retreat, remains higher than when all this started. Wall Street really did get Donald Trump wrong when they greeted him with open arms last November.

Back in the UK, there was some slightly better than expected inflation news, as the annual rate fell to 2.6%, which was below economists expectaions, the core rate remains well above 3%. Yesterday the Office for National Statistics painted an interesting picture of the Labour market. According to the data released, regular pay growth remains strong, having increased slightly in the latest period. However, the number of employees on the payroll fell slightly over the same period. Vacancies fell once again during the quarter and are now below pre-pandemic levels for the first time since the spring of 2021, which one can interpret as employers are not being so keen to hire. The higher costs of employing people appear to be biting into the labour market.

In the coming months, consumers and industry in the UK may get a boost from weaker oil prices and the stronger pound to the US dollar. The fall in the oil price, combined with the rising pound, has resulted in a near 25% fall in the price of oil in sterling terms. At some point, this will be reflected at the pumps to some degree. Cheaper petrol boosts the economy; it is, in effect, a tax cut and should encourage consumer spending, which in turn helps the economy. Have a lovely Easter, back after the break.