This week has seen Moet Hennessy Louis Vuitton (LVMH) market cap exceed $500bn. It is the first European name to achieve this, taking a place in the top 10 companies in the world by market value, a list dominated by US and Saudi Arabian names. This milestone also sees founder, Bernard Arnault, take the title of the world’s wealthiest man. LVMH have most recently benefited from the improving economic outlook in China, as consumers have propelled spending after the removal of the Covid restrictions.
Over the past year, the UK has been touted as a key spot for M&A, with some of the most active sectors including technology, healthcare, and consumer goods. Increased M&A can be a good thing as it helps identify how other countries view our economy and the opportunities that exist. Medica group is the latest to be snapped up by a private equity firm resulting in a share price surge of 33%. This is a company we have exposure to through our UK Smaller companies position.
We are still in earnings season and Barclays have announced stronger than expected first quarter profits at £2.6 billion. This is a 16% profit jump from this time a year ago, as its results prove that it has not been hindered by the US regional banking crisis, despite Barclays expanding its investment and retail banking overseas. Performance was driven mainly by its credit card business, rising by 47% to £1.3bn, a sign that consumers are beginning to feel the pinch of elevated inflation.
Economists this week have been trying to predict the future and envisage what the ECB are likely to do ahead of next weeks meeting. It is almost certain that we will see a 25bps rise to take the base rate to 3.25%, as inflation reports around the Euro zone are still greater than the 2% target set. ECB President, Christine Lagarde, maintains the message that the central bank “still has a way to go” with monetary policy, as core inflation appears to be more stubborn than anticipated, pushing back the timeline for the rate pause.
In the US, President Joe Biden launched his re-election bid promising to protect Americans from “extremists” connected to former president Donald Trump. It is very likely that he will face Trump again in the November 2024 election as he started his campaign video with imagery from the 6th of January 2021 attack on the US Capitol by Trump supporters. The American population have concerns over the age of Mr Biden, 80, who would be 86 by the end of a potential second term. However, his triumphs during his reign have included billions of dollars in federal funds tackling the Covid pandemic, signing a $1.2 billion infrastructure bill into law and overseeing the lowest levels of unemployment since 1969.
US GDP figures for the first quarter were released on Thursday at 1.1%, coming in lower than the forecasted 2%. There was an acceleration in consumer spending which accounts for over two-thirds of US GDP, with increased purchases of motor vehicles, visiting restaurants and hotels. This, however, was offset by falling business confidence leading to smaller inventories held in anticipation of weaker demand. The US Fed is also expected to meet next week, with investors predicting that another 25bps hike is on the cards. It is still to early to predict whether this will be the last hike of the fastest monetary policy tightening in over 40 years.
We as always maintain our message on diversification, ensuring portfolios are not overly exposed to shifts in market narratives. It is important to focus on the long-term opportunities that are created by the short-term volatility in markets.
Nathan Amaning, Investment Analyst
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.