Weekly Market View from Realm Investment Management. Week ending 1st July 2022.
Stock markets were lower last week, giving back some of the gains of the previous week which saw a strong rally from multi-month lows. Investors are worried that recession is close as the Fed aggressively tightens monetary policy in the battle against inflation.
It is interesting though that even as inflation concerns are peaking, commodity prices have been falling, with oil, natural gas, copper, grains etc all lower over recent weeks. Also, the US Core PCE Price Index (the Fed’s preferred measure of inflation which excludes food and energy) came in at 4.7% (annual) for May, down from 4.9% in April and slightly below expectations – a possible indication that price pressures may have peaked but the Fed will need more evidence than that before deviating from the current plans to get inflation back to 2%.
In Europe, inflation rose to 8.6% in June, but the ECB is expected to stick with 0.25% as the next interest rate hike. Christine Lagarde (ECB President) stated that larger hikes would only be considered if “the medium-term inflation outlook persists or deteriorates”.
In the UK, data from the ONS showed households’ disposable income fell in real terms for the fourth quarter in a row. BoE Governor Andrew Bailey said it was “very clear” the economy was starting to slow.
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