Week ending 19th August 2022.

Global equity markets gave back some of last week’s impressive gains after a number of Fed policymakers said that the US needs higher interest rates to tame inflation, even if that results in a recession.

Additionally, on Wednesday (17 August 2022) we saw the minutes of the last Fed monetary policy (which was held on 27 July 2022) and while policymakers essentially acknowledged that economic growth momentum was slowing and repeated that there was a risk of over-tightening monetary policy, they also suggest that Fed policymakers aren’t worried about slower economic growth or over-tightening as they believe higher interest rates are required to get demand back in-line with supply in order to prevent the current high inflation becoming entrenched!

Despite the fact that we believe it will actually be difficult for prices to keep rising given that we will soon have respite from what is known as ‘base effects’, not to mention the recent fall in oil and other commodity prices, it looks as though Fed policymakers are still inclined towards another large interest rate increase at their meeting on 21 September 2022, bearing in mind that we still have an awful lot of important economic data releases before then.

Interestingly, we have the annual Jackson Hole Economic Policy Symposium next week (25 – 27 August 2022) – and rest assured we will be intensely listening to Jay Powell’s (the Fed Chair) speech for any profound comments.

Elsewhere, data released today (19 August 2022), showed that UK retail sales increased by 0.4% during July.  Economists had forecast a contraction of 0.3% – and this coupled with the resilient UK employment data released on Monday (please see here), may embolden the BoE to join the trend for a large interest rate increase when they next meet on 15 September 2022.

This coming week, in addition to Jackson Hole, we have US, UK, Eurozone & Japanese PMI; US housing data; US durable goods orders; and Eurozone consumer confidence.

Investment Management Team

The latest market updates are brought to you by Investment Managers & Analysts at Wealth at Work Limited which is a member of the Wealth at Work group of companies.

Links to websites external to those of Wealth at Work Limited (also referred to here as 'we', 'us', 'our' 'ours') will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Any hyperlinks or references to third party websites are provided for your convenience only. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Further, we accept no responsibility for any malicious codes (or their consequences) of external sites. Nor do we endorse any organisation or publication to which we link and make no representations about them.