Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Equity markets were mixed for the week, with positive returns in the UK and Japan. In the US, markets snapped a string of four consecutive weekly gains for the S&P 500 and NASDAQ. With the next US Central Bank meeting just over a month away, investors are worried about the pace of further interest rate increases.
Minutes released from last month’s US Federal Reserve (Central Bank) meeting showed that policymakers agreed they need to keep raising interest rates, while also looking for inflation to fall substantially before considering reducing interest rates. Investors would prefer to see interest rates falling sooner to avoid a recession.
Turkish President Erdogan backed peace talks between Kyiv and Moscow after meeting President Zelenskyy in Ukraine. However, the Turkish president has pursued a balancing act, condemning the invasion and selling combat drones to Ukraine, but refusing to impose sanctions against Russia. As a result, he is a likely mediator.
Inflation in Europe increased to 8.9% in July 2022 (vs 8.6% in June), up from 2.2% a year earlier. Costs for food, alcohol & tobacco, industrial goods, and services accelerated, while the cost of energy slowed. In addition, core annual inflation increased to 4% from 3.7%. Similarly, UK inflation hit a high of 10.1% in July vs 9.4% in June.
Minutes released from the Federal Reserve meeting in July showed that the Central Bank discussed the prospect of needing to keep interest rates elevated for some time in a bid to contain high inflation. However, the level and pace of future rate hikes will depend on incoming economic data, notably inflation.
Oil closed under the $90 per barrel mark on Friday, which resulted in a 2.5% decline on the week amid increasing concerns of a global economic slowdown. Recession fears continue to exert pressure on energy markets, with the Fed minutes signalling a solid commitment to bringing inflation down substantially.
Google parent company Alphabet published its 2022 Sustainable Bond Impact Report, indicating that the company has completed the allocation of the proceeds of its 2020 $5.7 billion sustainability bond. The top category for investment was Green Buildings, with Alphabet spending nearly $2.5 billion on the design, construction, and improvements of 14 green buildings, totalling 807,000 square meters.
This week, investors and economists will turn their attention to the Rocky Mountain town of Jackson Hole, Wyoming, where the US Federal Reserve will hold its annual three-day economic policy symposium beginning Thursday, August 25. Fed Chair Jerome Powell is among the featured speakers. Additionally, investors will closely follow the monetary policy meeting in China.
Sources: 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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All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Issued by Marlborough Investment Management Limited, authorised and regulated by the Financial Conduct Authority (reference number 115231). Registered office: PO BOX 1852 Lichfield, Staffordshire, England, WS13 8XU. Registered in England No. 01947598. The Clever Marlborough Model Portfolio Service (‘Clever MPS’) is a collaboration between Marlborough Investment Management Limited as the Discretionary Fund Manager and Clever Adviser Technology Limited, a company registered in England and Wales (company number 2910523) with registered office at Watergate House, 85 Watergate Street, Chester, Cheshire CH1 2LF (“Clever”). Clever is a technology and software provision company which developed a methodology and proprietary suite of algorithms for the monitoring, analysis, collation, and transmission of data on the performance of Investment Funds and related portfolios within the UK market which Marlborough utilises for investment purposes.