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For many, the pain trade continues as US stocks, particularly technology stocks, seek support, while Stocks in Europe, especially German ones, find new admirers. The latest Merrill Lynch Fund Manager Survey revealed the rate at which investors are dumping US shares for those listed in Europe. If the survey results are to be believed, fund managers are moving out of US stocks at the fastest rate on record; this can be partly explained as the same survey at the start of the year had portfolio managers with the most overweight US equities on record and the most underweight EU in 2 years.

We may be getting closer to capitulation for holders of US stocks, as they may look better value than they did a few weeks ago, but still, it remains challenging to find many bargains. In January, the emergence of DeepSeek’s R1 artificial intelligence program from China prompted a stock market selloff; yesterday, BYD announced they had produced a battery that can charge at the same rate as filling a petrol tank, putting a further dent in Tesla’s share price. One can see the impact political uncertainty has had on US economic sentiment. The Russell 2000 index of smaller-cap companies is considered more sensitive to the economic outlook; that index is almost in bear market territory, down almost 20% from its November peak.

Yesterday and today, the voting members of the Federal Reserve meet, and at the end of this 2-day get-together, they announce the interest rate decision to the world. No one anticipates they will announce a change in monetary policy today; what will be of greater interest and command the market focus will be the Fed’s quarterly views on the underlying strength of the economy, whether the “dot plot” which indicates the path members see for interest rates in the years ahead has changed and any adjustments to their outlook for inflation, and unemployment. One would imagine Mr Powell would try to offer reassurance, as he did in a recent speech.

Ahead of tonight’s announcement, the monthly retail sales data released on Monday did report a rebound in February but came in below expectations; the previous month’s data were revised even lower. In a nutshell, the report underlined the concerns the consumer is still tapped out. On a slightly more positive note, industrial production increased by 0.7% in February, beating the expected consensus gain of 0.2%.

The Bank of England monthly meeting will be held tomorrow, and the latest UK employment data will be released ahead of that meeting. As with the Fed, no change is expected to UK rates tomorrow.