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Coutts-MONTHLY UPDATE: Market mood lifts as investors look ahead.

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ENPNewswire-August 8, 2022--Coutts-MONTHLY UPDATE: Market mood lifts as investors look ahead

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Release date- 07082022 - As markets rally, we continue to focus on data-driven investing.

Inflation has been hotter than expected again recently - the US Consumer Price Index leapt to 9.1% in June from 8.6% in May. The jump left the US Federal Reserve with no choice but to raise interest rates by 0.75% for the second month running.

But high inflation and rising rates actually aren't the most important thing on investors' minds any more. With many leading economic indicators falling - including our own in-house ones - investors are shifting their attention towards the risk of a recession.

And with financial markets relatively unfazed by the higher inflation and interest rate numbers, they rebounded from June lows. The MSCI All Countries World Index returned 7.1 % in July (local currency, income reinvested), versus -7.4% the previous month.

So why the change? Markets are forward-looking, with asset prices reflecting what investors think could happen many months ahead. And with the probability of a recession rising, markets have started to speculate about what central banks might do to save their economies. For example, they started to discount the expectation that US interest rates could be cut in the first quarter of 2023, which could be very positive for rising equities and bond prices.

Do remember that the value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. Past performance should not be taken as a guide to future performance. You should continue to hold cash for your short-term needs.

Recession, but not as we know it

July saw the rollout of many corporate earnings announcements for the second quarter of the year. Expectations were low running into this period but the results have been fairly decent - certainly not the disappointment some had predicted. Several 'growth' companies - like technology firms which make up a large part of the US market - announced a solid quarter. Nevertheless, forward looking company comments were on the cautious side, and...

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