Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Market Recap.
Equity markets delivered a mixed performance for the week. The UK stock market experienced a slight decline of 0.5%, while US stocks posted returns of approximately 0.4%. On the other hand, Japanese and emerging market stocks witnessed gains of over 1%. This risk-on sentiment benefited higher yielding company bonds, which delivered positive returns for the week.
News.
The S&P 500 index surpassed the level required to exit the bear market that had persisted since January 2022. With a rise of 20% since its low on October 122022, the index has officially entered a bull market. This rally has been fueled by the enthusiasm surrounding artificial intelligence (AI) and the resilience of the economy in the face of higher interest rates.
Geopolitics.
Boris Johnson’s resignation from the Commons has triggered a by-election, creating potential challenges for the Tories. This move places additional pressure on Rishi Sunak. Johnson cited the investigation into his alleged deception regarding lockdown parties in Downing Street as the reason for his departure.
Inflation.
Unlike the UK, China’s economy faces very little inflation. Weak domestic and overseas demand, a sluggish property market, and high youth unemployment contribute to the low inflation figures. China’s consumer price index recorded a 0.2% rise in May compared to the previous year.
Central Banks.
This week, the US Federal Reserve is expected to keep interest rates on hold at 5.25%. This decision could break the trend of consecutive rate hikes observed in the past 10 meetings. Investors will closely observe the outcome of this meeting to see if interest rates have peaked or if there is any likelihood of further rises.
Commodities.
Oil prices closed the week at $70 per barrel. The price fell around 1% for the week. Uncertainties in China weighed on the market, as China is a leading crude importer, and investors feared this may negatively impact overall demand. Despite these developments, oil prices appeared largely unchanged from the previous week’s close.
ESG.
New York’s air quality has been severely affected by smoke from intense Canadian forest fires, ranking it as the world’s poorest air quality. The thick smoke has disrupted various activities, including air travel and Broadway shows. This situation serves as a reminder of the challenges faced during the Covid-19 pandemic, prompting authorities to advise people to remain indoors.
Week Ahead.
The UK is expected to confirm a rebound in April’s GDP, but the jobless rate may rise to 4%. In the US, attention will turn to the Fed’s interest rate decision, the inflation rate, and retail sales. Investors will closely follow monetary policy meetings by the ECB and Bank of Japan. China will release industrial production and retail sales data.
Sources: Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s CIO – Multi Asset, Multi Asset Investment Team, Financial Times, The Wall Street Journal, John Hancock, Morningstar, Trading Economics, ESG Today.
Risk Warning: These are Nathan’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
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