This morning our Chief Investment Officer, Jeff Casson previews the week ahead in the markets, and what that means for your investments. As reporting season is well underway, Jeff looks to UK employment and inflation, inflation data from the USA and how they may influence monetary policy.

This week our experts review recent market fluctuations. Weakness in the US labour market began a fall in global equity markets due to fears that the US economy was slowing. We have also seen the Ministry of Finance in Japan intervene to strengthen the Japanese Yen, and a further increase in Japanese interest rates. Altogether, this caused investors to position away from Japanese equities. The Japanese Stock market was down 20% on Monday, but recovered materially to only -6.5% over the week. So although we have seen some volatility in equity markets, there has been a rebound in global market performance, and we expect the Federal Reserve to cut interest rates in September to help stabilise the US economy.

George Bell, Portfolio Manager, looks at what was a more encouraging day for equity markets outside of the US yesterday. Comments from the Bank of Japan’s Deputy Governor Uchinda noted that they will not raise rates further during current market instability which was welcomed as positive news for markets. In the US, attempts from the Treasury to raise capital through the issuance of bonds was met with weaker demand than expected and the wave of economic data last week points to a slowing of the US economy albeit from a very healthy level. The implied volatility indicated by the VIX index or the Wall Street Fear index has dropped dramatically, which could be an indication of more market stability. Comments later today from the President of the Richmond Fed will be listened to closely as to what to expect in September, the market is currently placing a 71.5% probability of a rate cut but with an expectation of a 0.5% cut rather than 0.25%.

After market volatility at the start of the week, all main equity markets finished positive in what is being named “Turnaround Tuesday”. Chris Leyland, Director of Investment Strategy, looks at Nvidia and Meta which have rebounded up 4% each and cover about some of the weakness seen in Sovereign Bonds and Gold as investors rotate towards equities and demonstrate a willingness to add risk to their portfolios. In other news, the Halifax House Price Index in the UK rose by 2.3% year-on-year, marking the sharpest annual growth since January.

Over the last week there has been a spike in volatility across equity markets, with notable movements in Japan, Small-Cap and Technology. Paul Durrans, Investment Director, looks at the causes behind this volatility, the complex interplay of key events that have impacted markets and provides some perspective as to the upsides in US markets as well as the opportunities that often emerge during these periods.

Following a volatile reaction in equity markets last week, attention will be focused on US survey data this week. Kevin Kidney, Head of Asset Allocation looks to the imminent US ISM services data and its importance as markets worry that the US economy is slowing. Will the Federal Reserve step in with an emergency rate cut following the figures this week? Towards the end of the week we get inflation data from China, which having not seen any real inflation pressures for 3 years, is now seeing a fall in consumer prices.

The Bank of England have cut interest rates from 5.25% to 5%, but how does this affect your money and how did markets respond? Faye Graham, Investment Analyst and Paul Durrans, Investment Director, go over the key takeaways from the decision and what the outlook is for further additional interest rate cuts. In contrast the Bank of Japan raised interest rates in an effort to lower inflation. In the US, the Federal Reserve decided leave interest rates unchanged. However, questions are being raised whether this was the right decision following the employment data released this Friday. We finish with corporate earnings where we’re seeing signs of consumers pulling back on spending and being more frugal with a notable decline in sales from McDonalds after raising prices on some products 27% since 2019.

Today, Matt Henderson, Portfolio Manager, reviews the Federal Reserve’s decision to hold interest rates at 5.25% to 5.5%.We review both inflation and employment in relation to the decision as they are both parts of the Fed's dual mandate. Although the rate remained unchanged, the markets are equally interested in the comments that follow policy decisions as Chair Jerome Powell highlighted that inflation has made progress towards target and if it remains low that a reduction in interest rates could come as soon as September.

Kevin Kidney, Head of Asset Allocation, looks to the monetary policy meetings taking place this week with the Federal Reserve and the Bank of England and the expectations on interest rate cuts. While no cuts are expected as of yet, there will be a keen eye on communications as to the direction of policy for both central banks with the European Central Bank and Bank of Canada having already begun their cutting cycles. The hesitancy to cut rates could be due to the scarring effect in which past failures to control the rise in inflation pressures through 2021 and 2022 lead to criticism. Contrast to this is the Bank of Japan which raised interest rates overnight to +0.25% with an intent to suppress future inflation pressures to around 1%.

Paul Durrans, Investment Director, looks at the latest corporate results and respective management comments to gauge the strength of consumer demand. Last week's US GDP report for Q2 2024 suggest consumer spending remains strong. However, investors are beginning to question whether higher interest rates are beginning to bite. Paul focuses on the latest results from McDonalds and the key trends within the wider retail sector.