Weekly Market Update- Week Ending 12/01/2024

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Equity markets remained range-bound this week as inflation data in the United States led to questions over whether investors are being over-optimistic regarding the potential for interest rate cuts in the first half of 2024.

According to the US Labor Department, inflation was 3.4% in the year to December, up from 3.1% in November, and higher than the 3.2% forecast by economists. Despite the increase, inflation is still expected to fall in the months ahead. It indicates, however, that it’s unlikely to follow a straight line and too early for central bankers to declare victory in their battle to get back towards their 2% target.

This week, many of the UK’s biggest retailers posted trading updates, reporting on how they performed during the all-important festive period. Despite 8.6% growth in its grocery sales in the 16 weeks to 6th January, Sainsbury’s shares were marked sharply lower on Wednesday as investors were disappointed by a fall in non-food sales. Rival Tesco’s shares saw gains with investors cheering record sales during the Christmas period, as the UK’s largest supermarket lifted its profit forecast for the full year. Marks & Spencer continued its impressive turnaround, beating forecasts by seeing like-for-like sales growth of 8.1% across the UK for the last 13 weeks of the year.

These company updates post quite a positive picture for the UK consumer, with individuals having the confidence to increase spending. Flashing back a year ago, uncertainty around soaring energy bills and climbing mortgage rates left large sectors of society feeling uneasy. While these pressures certainly still exist, with energy bills stabilising and mortgage rates continuing to fall over recent months (5-year deals now available under 4%), there is perhaps some light at the end of the tunnel.

John Naylor, Chartered FCSI – Head of Investment Committee
John Naylor