View of New York and Empire State Building to represent USA

Our Brief Weekly Economic and World Markets Overview from Quilter Cheviot

MARKET & ECONOMIC UPDATE

by Alan McIntosh, Chief Investment Strategist & Richard Carter, Head of Fixed Interest Research

“Thin summer markets can be volatile and last week was no exception. A temporary inversion of the US yield curve (2 year bond yields moving higher than 10 year bond yields); unnerved equity markets and triggered a series of lurid headlines about an imminent economic recession. Since 1945, each US recession has been preceded by such an inversion, with a time lag of between five and eight quarters from inversion to economic downturn. So why should this time be any different?

Recessions (and yield inversions) usually occur after a period of interest rate tightening by central banks. While the US Federal Reserve did raise interest rates on nine occasions this cycle, they have recently started to cut rates and are likely to do more this year. Meanwhile, the economy is in good shape. Employment is high, wages are growing and productivity is rising. The consumer represents 70% of GDP. None of this suggests that a US recession is imminent… ”

 

Investors should remember that the value of investments, and the income from them, can go down as well as up. You may not recover what you invest. This commentary has been produced for information purposes only and isn’t intended to constitute financial advice; investments referred to may not be suitable for all recipients. Any mention of a specific security should not be interpreted as a solicitation to buy or sell a specific security.