True Potential Morning Markets

For today's episode, Matt Henderson, Portfolio Manager, looks at the week ahead, assessing data points from the UK, US, Europe and Asia and what they tell us. Throughout the week, Central bank speakers will focus on current economic backdrop and monetary policy, which will be significant for financial markets.

The Bank of Japan, the Bank of England and the Federal Reserve all provided an update on their respective interest rate policy this week. Matt Henderson and Paul Durrans discuss what actions were taken by each central bank, as well as discuss the key messages and how the markets reacted.

The Federal Reserve have forecast three interest rate reductions in 2024 with indications of fewer rate cuts in 2025. Jeff Casson, Chief Investment Officer talks about the US GDP forecast, ongoing resiliency in US economic activity and expectations of higher growth for the next 3 years. How have equity and bond markets reacted to this?

As the Bank of England prepares for its Monetary Policy Committee this Thursday, inflation continues to fall and wage growth data may further encourage this towards their 2% target. George Bell, Portfolio Manager, discusses the market anticipation of an August interest rate cut. Today also marks an update from the US Federal Reserve on their economic projections as well as the dot plots graph which demonstrates each members interest rate projections into the future.

The Bank of Japan was the only central bank in the world applying a negative interest rate within its economy but new monetary policy decisions have shifted this. Matt Henderson, Portfolio Manager, discusses some the changes to the Bank of Japan’s

Indications of broadening wage based inflation could result in the Bank of Japan exiting negative interest rate policy for the first time in over 8 years. Kevin Kidney, Head of Asset Allocation, takes a look at the potential changes in Japan, the upcoming UK CPI print and whether we will continue to see a cooling of inflation pressures and the revised market expectations of interest rate cuts.

With challenges for UK growth in contrast to a strengthening US economy, Kevin Kidney and Paul Durrans explain factors such as the UK private sector employment data, how it feeds into the GDP print released this week and how that reflects the stark contrast. We also get the equity market reaction to these developments with the expectations of falling interest rates.

Recently, we've seen Impressive equity market performance across regions - but what is driving them? Kevin Kidney, Head of Asset Allocation, discusses the different factors influencing equity markets and highlights the fundamental change in Japan's corporate attitudes towards shareholders as well as the Eurostoxx 50 outperforming the US.

Can the UK hit the office for budget responsibilities targets with the current growth impulse and employment trends? Kevin Kidney, Head of Asset Allocation, discusses whether the UK economy can grow with low private sector job growth. Also, the latest US CPI data also presents a challenge to the global 'disinflation' narrative.

The latest UK employment report shows some softness with a further moderation in wage growth while the unemployment rate unexpectedly increased. Paul Durrans, Investment Director discusses what this may mean for the Bank of England and the prospect of interest rate cuts.