Weekly Market Update and Featured Chart #6

A serene sunset view over a calm canal flanked by rows of terraced houses with their reflections in the water. A footpath runs alongside the canal. In the distance, the silhouette of a grand cathedral's spires is visible against the orange hues of the setting sun.
For financial professionals only

This week’s market update highlights the latest macro news, stock market returns, inflation data and general market performance across the UK, US and Asia.

Here’s the key takeaways:

  • Good news for the UK consumer - UK store inflation hit its lowest level in nearly two years, with a 2.5% YoY rise in prices for February, down from 2.9% in January. This marks a ninth monthly decline. Grocery inflation also fell to 5.3%, a 1.5% decrease from January.
  • Japan sees falling inflation rates – lower food price increases saw Japan’s annual inflation rate drop to 2.2% in January, from 2.6% in December. The lowest in nearly two years. Core inflation came in at 2%, easing pressure on the Bank of Japan to raise rates.
  • Moderate growth in the US – the US economy expanded at a slightly lower rate of 3.2% in Q4 2023, down from an estimate of 3.3%. This was led by a decline in inventories, however it did show an increase in consumer spending. 
  • Tumbling European inflation - February saw inflation fall to 2.7%, 3.1% and 2.9% in Germany, France, and Spain. Falling rates and a spluttering Euro area economy saw economists hinting at potential mid-year interest rate cuts by the European Central Bank.
  • UK house prices defy expectations – following an unsettling 2023, UK house prices have started to bounce back. The latest figures from Nationwide show prices rose 0.7% in January, and rising 1.2% year-on-year. The UK market is showing remarkable resilience considering expectations for double digit drops last year. 

What does that mean for me and my clients?

The economic backdrop is beginning to look a little brighter. The continuing falls in inflation raise the prospect of interest rate cuts across most markets. However, caution is warranted. Labour markets and wage price gains remain robust, so central bankers will be keen to see this tide change before rushing into any decisions. The pace and severity of rate cuts are likely to be tempered, at least in the short term. 

Chart of the week

Line graph representing the MSCI USA Technology Index Price to Sales Ratio from 1995 to 2024. The ratio fluctuates over time, with a notable peak around the year 2000, a gradual increase starting from 2009, and another sharp rise from 2020 onwards. The graph includes a solid blue line indicating the Price to Sales Ratio, a solid black line representing the mean, and dashed red lines denoting standard deviation intervals at plus or minus one and two standard deviations from the mean.

Source: Lightman, Bloomberg, MSCI, February 2024

The chart above shows the Price to Sales ratio of the US Technology index from 1995 to present day. It shows that tech valuations are now higher than the peak of the tech bubble in 1999/2000. 

Why’s this worth sharing?

While the debate over US tech valuations continues to rage on, the warning signs are plain to see. It’s not inconceivable that returns from the ‘magnificent 7’ continue. But the likelihood of sustained outperformance is questionable over the long term. Stock market performance is becoming ever more concentrated in just a handful of stocks, so it’s more important than ever to make sure portfolios are diversified across asset classes, regions and market capitalisations. 

The Markets

The FTSE 100 & 250 fell this week after some high-profile profit warnings from the likes of St James Place (SJP), Rekkitt Benckiser and Halfords. All three stocks were down following company specific issues. SJP has had to put aside £426m for potential customer refunds linked to ‘the lack of an on-going advice service.’ The UK government has also begun talks with brokers as it looks to offload its remaining 33% ownership of NatWest shares.

Returns in the US were relatively muted this week with earnings season almost over. US stocks are looking increasingly expensive and with index’s hovering round all time highs, the potential for outperformance looks slim. Even Warren Buffet reported this week that Berkshire Hathaway’s cash pile had reached a record high of $167bn as the company struggles to find deals at attractive valuations. 

Japanese markets continued their impressive march onwards showing no signs of let up. Oil extended gains this week in anticipation of OPEC+ set to decide early this month whether to extend supply cuts in the 2nd quarter. 

Weekly ChangeYtD Change
FTSE 100-0.79%-1.18%
FTSE 250-0.32%-2.34%
S&P 500-0.027.45%
Hang Seng-0.64%-1.25%
Nikkei 2251.50%19.89%
Brent Crude1.75%7.37%
Gold Spot0.70%-0.63%
UK 10yr GILT+1bp+58bps
US 10yr Treasury-2bps+26bps

Source: FE FundInfo, figures as at close Thursday.


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.  

Speak to us and find out how we can help your business thrive.