- 31st July 2023
- Posted by: Celticfp
- Category: Investment Committee
Understanding the complex world of finance and markets is crucial for every investor. Here’s a simplified breakdown of recent events that have shaped the global economic landscape:
Markets Resilient to Interest Rate Increases
Last week, equity markets remained strong, even with interest rate hikes in Europe and the US. Some are calling these markets “Teflon markets” because they seem immune to changes. The markets keep moving up, like running on an upward-inclining treadmill.
Bank of Japan’s New Policy
The Bank of Japan is starting to adjust its yield-curve-control policy. This move caused a small increase in the 10-year bond yield. This change is normal for UK investors but noteworthy for the Japanese market, as it could affect certain investment strategies involving Japanese yen.
Chinese Markets Showing Stability
Chinese markets experienced growth at the beginning of last week. Though analysts don’t expect massive support measures, the risks seem to have diminished, hinting at potential stability in the Chinese market.
Historic Week for Central Banks
Both the US Federal Reserve and the European Central Bank (ECB) increased their interest rates, reaching their highest levels in decades. Further hikes might be on the horizon as concerns over inflation persist. The Bank of England might follow suit, with the complex situation of Brexit and other factors influencing their decision.
Upcoming Central Bank Meetings
Next month’s central bankers’ symposium at Jackson Hole, Wyoming, could be crucial. It helps central banks understand how their actions impact one another and may set the tone for future policy decisions.
Q2 Earnings Season Overview
US and European companies are expected to see a fall in Q2 earnings, but stock markets are up, showing resilience. While some investors are worried about high valuations, others see opportunities, particularly outside the technology sector.
The Bigger Picture
The recent gains in the US market have been driven mainly by eight technology companies benefiting from the AI-related investment boom. However, other non-tech companies appear to be in a more reasonable position with more modest valuations and expectations.
In summary, while the global financial landscape has witnessed significant changes, including interest rate hikes and policy shifts, markets continue to show resilience. These trends provide both optimism for growth and cautionary notes for investors aware of potential risks and opportunities. It’s a time to stay informed, keep an eye on emerging trends, and possibly seek professional financial advice to navigate this evolving landscape.
Celtic Financial TV
Every month you can now watch a short market update with our head economist Chris Bailey on YouTube, simply head over to Our Channel – here you can watch our market update archive.
This article is for information purposes only – should not be perceived as financial advice. We recommend you should always speak to a financial adviser before making any investment decisions.
Please note, past performance is not a reliable indicator to future returns. Your investment may fall as well as rise, and you may not get back what you put in.