The US Jackson Hole symposium is the markets most anticipated event of the week. Mr Jerome Powell, Fed chairman, is due to make his keynote speech today where he could give an indication of the FOMC’s next move in terms of a further 50 or 70 basis points rate hike. Given there is another US employment report and inflation print before the next Fed Meeting at the end of September, we will also hope to hear about the longer-term outlook for policy.
We are now under 2 weeks before the new Prime Minister is announced, and their first call of action will be to tackle the UK’s rising energy cap. Both candidates (Mr Sunak and Ms Truss) have refused to give any detail into exactly how they would do this until they were ‘in office’. This move has certainly heightened UK household’s concerns. This morning Ofgem announced that the average household bill will hit £3,549 from October – an eye watering rise of 80% on the current price cap and a huge blow for consumers already struggling with soaring inflation. Energy prices have fuelled rampant inflation that has now been forecast to rise in Q1 2023 to 18%.
Diving deeper into the UK market, shares of Micro Focus soared more than 90% at today’s market open after OpenText (Canadian Software Company) agreed a $6Bn deal to purchase the company. Micro Focus is a firm that has grown by acquiring mainframe computer software used by banks, retailers and airlines but OpenText believe they can ‘stabilise Micro Focus business and accelerate its cloud transition’. There has been a continual trend of foreign companies purchasing UK Tech names.
Europe faced some bad news as business activity shrank this month. Germany’s manufacturing industries are leading the decline as PMI fell to 47.6 in July. Any score below 50 indicates falling activity. The French economy also edged into negative territory at 49.8. Supply bottlenecks, consistent inflation and rising interest rates continue to drain demand for companies and their customers.
China have stepped up their efforts in economic stimulus by announcing a further 1 trillion yuan ($146BN) to lessen the impact of repeated covid lockdowns and property market crisis. It is seen that this investment will offset the previous sharp contraction in government revenue and support infrastructure growth. China’s GDP target of 5.5% is almost certainly out of reach with economists forecasting growth slowing to 3.7%.
Given tough times as such, our investment approach and portfolio construction stays consistent. We aim to ensure that there is a diverse blend of assets held in portfolios and our long-term investment time horizon also allows us to potentially look past weak data with a level of optimism for future returns.
Nathan Amaning | Investment Analyst, Raymond James, Barbican
Risk warning: 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.