Market Overview|Quilter Cheviot

Equities pull-back after Powell speech

Market Overview from Quilter Cheviot

By Alan McIntosh, Chief Investment Strategist

Global stock markets came under pressure at the back end of last week after Jerome Powell, chair of the Federal Reserve (Fed), reiterated the central bank’s determination to continue raising rates to tame high inflation. The MSCI All Country World Index fell by 2.9% on the week, with the bulk of the declines occurring on Friday. The reaction in fixed interest markets was more muted, although also reflective of a hawkish message, with bond yields moving back higher.

There was not much new in Powell’s short speech at the annual Jackson Hole symposium. Rather, it was what he did not say that triggered the market reaction, with the absence of any reference to a forthcoming shift in Fed policy causing selling in equity markets. The overall tone was in keeping with several comments from other Fed officials, with Powell effectively pushing back on any suggestion of a big pivot in early 2023.

Shortly before the address, there was more good news on the inflation front, as the latest core personal core expenditure price index rose less than expected in July, increasing month-on-month by 0.1% versus and consensus forecast of 0.2%. The previous month’s reading was 0.6%. This supports the most recent US consumer price index reading and suggests that inflationary pressure in the US may have peaked…

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