Last year in the US Easter chocolate sales reached $5.4bn and early expectations are that sales will reach this figure once more, however this will be achieved by the increase in prices rather than volumes sold. Confectionery brands have had to hike prices due to a “cocoa crunch” as the price of cocoa has tripled over the past 12 months due to difficult weather conditions and disease affecting supply in West Africa.
UK retail sales for February (month-on-month) held flat despite negative market expectations of -0.2% following strong January figures. We have had one of the wettest winters this year affecting footfall in stores, however this was offset by an increase in the volume of online sales, the largest rise since July 2023. With UK CPI continuing to fall and the highly anticipated interest rate cuts expected to begin this summer, there is the expectation that retail activity will continue to rebound as pressures on the consumer begin to ease.
Bank of England (BoE) policy committee member, Catherine Mann, was one of two committee members who changed their view on increasing interest rates to keeping them steady. She warned that markets are expecting too many interest rate cuts this year and expects that the BoE will not cut rates before the US Federal Reserve or European Central Bank. High street banks have already begun to offer households and businesses cheaper loans ahead of interest rate cuts, which Ms Mann believes may be premature. Her change in stance to hold rates came after positive signs of a slowing jobs market with more companies reluctant to hire, a theme that may combat wage inflation.
In the US, the CEO of aircraft company Boeing has announced he will step down at the end of this year. Dave Calhoun’s company has been under severe pressure to reassure US regulators, airlines and passengers that their aircrafts were fit for purpose following the recent cabin panel blowout incident. The confirmation of key overhauls in management sent the stock up marginally this week, however the company’s share price has struggled since the blowout event, down 25% for the year and a long way off the highs set before Covid-19.
This Wednesday in Japan an emergency meeting between key policymakers was held to discuss the weak Yen as it hit a 34-year low against the US Dollar. Despite the Bank of Japan making the historic shift away from negative interest rates last week, the Yen has continued to fall against the US dollar. Japan Finance Minister, Shunichi Suzuki, said that policymakers would take “decisive steps” against the yen weakness, the last time he used such language was in 2022 when Japan intervened to buy the currency.
Today is the last working day in Q1 and brings to a close a strong quarter for equities, with it being the best start to a year for US equities since 2019. As we look out into Q2 there are reasons to be positive, with the possibility of falling inflation and interest rate cuts helping push equities and bonds higher. We have marginally increased interest rate sensitivity in portfolios, while also maintaining our small and mid-cap equity exposure, which could be big beneficiaries of falling interest rate expectations, something we witnessed at the end of 2023.
We would like to wish everyone a fantastic long weekend. For those wondering it is estimated the UK will spend £415 million on Easter chocolate this year!
Nathan Amaning, Investment Analyst
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