Weekly Market Update – Week Ending 01/03/24

It was a broadly positive week for equity markets. Investors welcomed the news on Thursday that the Federal Reserve’s preferred metric for inflation in January was in line with expectations at 2.4%. This supports the belief that we will start to see interest rate cuts in the United States, perhaps from the middle of the year.  

Next Wednesday will see Chancellor Jeremy Hunt standing at the despatch box delivering his much-anticipated Spring budget. With the conservatives trailing behind labour in the polls, it looks likely to include some vote-winning policies aimed at boosting the nation’s disposable income. What form that comes in remains to be seen, with speculation that there might be a cut in national insurance or income tax. A move up of the tax bands would certainly be welcome, given they have remained fixed, while wage inflation has been elevated.

With inflation expected to trend lower in the months ahead, and the UK now officially in recession, this provides Mr Hunt with the freedom to try to stimulate the economy. Although, I am sure the members of the monetary policy committee at the Bank of England will be keeping a close eye on events.

As seems to be the case these days, I would expect that this weekend we will see a number of the announcements leaked, with the Chancellor leaving a couple of rabbits in the hat for Wednesday. Any giveaways in the form of tax cuts will need to be accounted for. Only 18 months ago, Liz Truss and Kwasi Kwarteng demonstrated what can happen to a country’s borrowing costs if you don’t at least attempt to balance the books.

John Naylor, Chartered FCSI – Head of Investment Committee