Market Overview|Quilter Cheviot

Stocks pull back on central bank tightening concerns

Market Overview from Quilter Cheviot

By Alan McIntosh, Chief Investment Strategist

Global equity benchmarks pulled back last week, paring some of the gains from the recent impressive rally as the MSCI All Country World Index ended down by 1.6%. Bond yields jumped on the re-emergence of concerns surrounding hawkish central banks, weighing on market sentiment.

The move in the fixed interest space was keenly felt in the UK as 10-year gilt yields rose by 30 basis points, driven by a new cycle high for inflation and stated policy plans of Liz Truss, the strong favourite to be announced as next prime minister in the coming weeks. The UK’s headline inflation rate hit 10.1% in July, the highest level in over 40 years. A sharp rise in food costs played a central role in pushing the measure into double digits but there was also a higher than expected core reading, which strips out food and energy prices, that rose to 6.2%.

Whereas hopes are rising that US inflation has topped out, things are expected to get worse before they get better for the UK and Citigroup forecast inflation could reach as high as 18% in early 2023…

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