In the May issue, we discuss how markets are trying to balance slowing growth with rising interest rates
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In its April World Economic Outlook, the IMF revised its 2022 growth forecast markedly lower. Rising commodity prices, the impact of Russian sanctions and a resurgence of COVID in China are dragging growth lower. However, at 3.6%, growth prospects for 2023 remain above average.
A buoyant labour market provides some hope for stock market investors, with jobless rates in the UK, Eurozone and US below pre-pandemic lows. The UK has seen the quickest labour market recovery in three decades. The latest UK CBI industrial trends survey also showed real appetite for capital investment from the corporate sector.
However, this needs to be weighed against the hawkish tone from central banks and persistently high inflation. Government bonds are now adjusting to the new environment, with a significant rise in yields since the start of 2022. There are signs that US inflation could be peaking, which could temper the need for the Federal Reserve to raise rates aggressively.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Please remember investment involves risk. The value of investments and the income from them can fall as well as rise and investors may not receive back the original amount invested. Past performance is not a guide to future performance.