Market Overview|Weekly Comment

A week to remember…

Our Weekly Market Overview from Quilter Cheviot

By Alan McIntosh, Chief Investment Strategist


Over 100 world leaders have gathered in Glasgow this week to try to turn the aspiration of the Paris Agreement of 2015, of limiting global warming to well below 2 degrees (or ideally 1.5 degrees) into action. Disappointingly, neither Russia’s Vladimir Putin nor China’s Xi Jinping will be in attendance. Neither Russia nor India have submitted updated proposals to reduce emissions. Meanwhile, the recent spike in energy prices is a stark reminder of how dependent much of the world is on fossil fuels. Many studies suggest that global emissions need to be cut by 40% by 2030 to have any chance of eventually meeting the 1.5 degrees target. The most recent report from the UN calculates that current plans submitted by 192 parties to the Paris Agreement will result in a rise in global greenhouse gas emissions of about 16% by that time. This is a crucial summit. Making pledges to cut emissions is one thing – setting out plans to deliver is something else. Hard economic choices will have to be made, but they have to be made soon.

Interest rates could well be on the way up later this week if the Bank of England’s Monetary Policy Committee vote in favour of an increase. Official forecasts see inflation rising above 4% in the coming months, although much of that reflects supply bottlenecks which have pushed up prices. Notwithstanding that, demand is also strong with UK GDP expected to rise by 6.5% this year and 6.0% in 2022, according to the Office for Budget Responsibility. Balancing strong demand against restricted supply is a difficult balancing act for any central bank to get right. One hopes that the Bank of England does not become over-zealous with regard to the former.

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