US equities climbed to their highest level since August of last year, whilst the rally in the US technology sector since its December low now exceeds 19% as the Federal Reserve (Fed) slowed the pace of rate increases to 0.25%, taking rates to an upper range of 4.75%. Perhaps most notably, in a week when the European Central Bank and the Bank of England raised rates by 0.5%, the overly cautious tone evident in previous speeches was increasingly absent.
As of 12pm on Friday, London time, US equities rose by 2.7% over the week, with the US technology sector increasing by 5.0%. European markets were up by 0.8%, with UK stocks climbing by 1.1%, with mid and small cap stocks strongly outperforming large cap companies. Australian stocks also rose by 0.9%, whilst the Japanese market fell by 0.6%. Emerging markets also fell by 0.5% having risen strongly over January. Hong Kong stocks, which had risen over 50% since their October 2022 low, fell 4.5%, whilst Indian stocks, which have been a laggard since the beginning of the year, increased by 2.6%.
Government bonds also rallied, with yields (which move inversely to price) falling, the 10-year US Treasury yield now stands at 3.38%. German bunds and UK gilts also rallied, with 10-yields now trading at 2.15% and 3.02% respectively.
The growing market confidence in inflation having peaked pushed gold prices lower over the week, falling by 0.9%, now priced at $1,928 an ounce. However, perhaps counterintuitively given the reopening of the Chinese economy, crude oil prices fell over the week, with Brent crude falling by over 5% and a barrel of oil now trading at $82.1.
Markets have been buoyed by downward signs in the trajectory of inflation and a sense that a peak in the interest rate cycle is near. So far unemployment has not risen, providing optimism that perhaps central banks can navigate a soft economic landing.
However, monetary policy acts with a lag, and having seen a massive increase in stimulus during the Covid pandemic, the major developed economies are now experiencing a massive fall in stimulus as interest rate rises are combined with quantitative tightening. Only time will tell whether we are out of the woods or whether we are due a recession and potentially another leg down in markets.
Lawsons Equity Limited is a company registered in Malta with company number C49564 and Licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here
In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Financial Services Contracts Regime, which allows EEA-based firms to operate in the UK for a limited period to carry on activities which are necessary for the performance of pre-existing contracts, are available on the Financial Conduct Authority’s website.
Copyright 2020 Lawsons Equity Ltd | Designed by Echo
Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Lawsons Equity Limited has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Lawsons Equity Limited does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Lawsons Equity Limited.