Over recent years many of us have become accustomed to “Black Friday’” – the day after Thanksgiving where retailers offer discounts to mark the start of the Christmas shopping period. Although we are still a week away from this event, it seems the Friday before is now becoming “early Black Friday” with many discounted prices already appearing today.
It seems fitting then that we start this week’s round-up with the consumer. Here in the UK data published today showed that consumer confidence rose in November, despite the headwind of rising inflation. This was coupled with retail sales growing by 0.8% month-on-month, bucking the trend of recent declines. Retailers have reported that Christmas trading has begun early and could be a signal of bumper spending by the UK consumer over the period. A strong consumer normally translates into strong GDP for a country, given that around two-thirds of developed-world GDP is derived from consumption.
Staying with the UK, we once again need to mention inflation. The consumer price index (CPI) rose by 4.2% in October from a year ago, reaching a 10-year high. This figure, like the US inflation print last week, came in ahead of analyst expectations. With the Bank of England Monetary Policy Committee holding fire on raising rates at their previous meeting, attention is now turning to the December meeting where there is a rising expectation that UK interest rates may increase. However, this is not guaranteed, and it is fair to say that at least some of the inflation we are experiencing is due to pent-up demand in pockets of the economy, which will likely abate. We also need to be aware of the presence of base effects; comparing data to October 2020 when the economy was very fragile.
COVID-19 cases continue to rise in Europe, which now once again becomes the epicentre for the virus. Austria has announced a full national lockdown starting from Monday, which will run for a maximum of 20 days. Germany has announced further restrictions for the unvaccinated as infection rates hit record highs. European stock markets have proved resilient this week to the news, with investors looking through the short-term measures.
It’s been a while since we covered the Japanese economy in the weekly round-up. Japan has been a laggard this year when compared to its developed market peers from both an economic and investment returns standpoint. Mindful of the sluggish growth, benign inflation and low consumer confidence, the supposed fiscally prudent Prime Minister Kishida has announced a huge $488bn stimulus package to help offset the damage caused by COVID-19. At a time when other nations are slowly pegging back stimulus measures, Japan appears to be bucking the trend. This additional fiscal stimulus could boost prospects for the country; while we have exposure to Japanese equities in the portfolio, the Investment Committee will continue to ensure the level of exposure is suitable.
Having recently increased US allocations in client portfolios it is pleasing to see the US market continuing to grind higher, hitting new all-time highs this week. Stellar results from chipmaker Nvidia and upbeat news from retailers helped push the US bourses to new highs. While US equities are currently a core of our equity component in portfolios, we continue to diversify across geographical regions and sectors, blending active managers with passive strategies.
Andy Triggs | Head of Investments, Raymond James, Barbican
With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.