Weekly Market Update and Featured Chart #15

This week’s market update highlights the latest economic news and general market performance across the UK, US and Asia.

The key takeaways:

• US interest rates hold steady – The Fed left interest rates unchanged at their latest meeting, with Chairman Powell leaving the chances of a cut in 2024 alive - but indicating chances of a hike are unlikely.
• World growth prospects improve - as UK lags – Organisation for Economic Co-operation and Development (OECD) data shows world growth outlook improving as the likelihood of stagflation falls, but the UK's prospects are among the worst for a developed nation.
• Housing market recovery? –UK mortgage approvals rise to highest in 18 months in a sign the housing market may be improving. A narrative challenged by recent lender rate hikes.
• Yen moves – The Bank of Japan likely intervened in currency markets for the first time since 2022, as the Yen experienced sharp swings in value following historic falls against the dollar. Officials are yet to confirm.
• Cocoa volatility – After more than doubling in value this year due to supply shortages, cocoa futures crashed heavily on liquidity concerns before shooting back up later the same day.

This week’s decision by the Fed to leave rates unchanged was expected by the markets. Hopes of multiple US rate cuts this year were beginning to fade as growth continued to remain resilient. The positive news for bond and growth-style equity investments, in the US and beyond, was Powell’s comments that a rate hike is unlikely. Something seen as a given just a few months ago, showing just how much expectations have changed.

Chart of the week

Source: Parmenion

Our chart of the week shows the stages of the economic cycle and where in the cycle our panel of economists believe we are.

In our Q1 economic survey, we asked a panel of economists where they think we are in the economic cycle. In their view we’re in either the mature expansion phase or at the beginning of the slowdown phase. Typically, this means growth is above trend, but set to decelerate. Equities tend to hold up well in these phases. But the types of equity, and investment-styles, that benefit differ depending on where we are in the cycle - cyclical equities typically do better in an expansion while defensive stocks tend to fair better in a slowdown. 


You can find a full version of the survey result here.

The FTSE 100 was buoyed by the oil majors, miners, and financials sectors, including takeover interest in Anglo-American. In the US, the S&P 500 was down marginally after a period of volatility following Powell’s comments on the possibility of adjustments to interest rates, while the NASDAQ climbed on a late tech-rally. The Hang Seng saw a week of straight gains with global money attracted by cheaper valuations and a supportive policy stance from China.

Gold fell owing to a reduced possibility of interest rate cuts in the US. Brent crude also fell (by its highest amount in months) following the easing of geopolitical risk in the Middle East and a weakening fuel market. Yields on both the US and UK 10-year bonds remained broadly flat, seeing only very minor falls.

This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.