INVESTMENTS & PENSIONS
WHAT A DIFFERENCE A YEAR MAKES
Neil Birrell , Chief Investment Officer
THE ONLY WAY IS UP
The last 2 months or so have been very good for investors in a broad range of different types of assets . Gold has risen by over 10 % since early October to stand at very near its recent all-time high .
Stock or equity markets have been strong as well , as measured by the MSCI World Index . They were up by over 15 % from near the end of October to the end of the year . It ’ s good to see some parts of the stock market that have done less well this year joining in the fun . The FTSE 250 Index , was up by around 17 % in the same period .
In other asset classes , bonds have also performed well . The yield on the 10-year US Treasury bond has fallen from 5 % to under 4 % since the middle of October . That is a very significant move in a very short space of time .
Property companies across the UK and Europe have had an even more significant move , they are up over 30 %, as measured by a broad index of Pan European property companies ( GPR 250 Europe Capped ( GBP ).
RECENT NEWS FROM THE CENTRAL BANKS
Many of the numbers above were given a turbo charge by the announcements from the US Federal Reserve ( Fed ), European Central Bank ( ECB ) and Bank of England ( BoE ) in their December updates .
In particular , the Fed set pulses racing . They kept interest rates unchanged , but the key point of interest was the guidance they provided , noting that inflation had eased and their median forecast is now for 0.75 % of interest rate cuts next year . This gives real credence to the view that they think inflation is under control and believe that their policy is producing a controlled slowdown of the economy and lower inflation .
Financial markets moved fast and brought forward the timing of when they expect the first interest rate cut to come to probably be at the March 2024 Fed meeting . If not March , then there is a strong certainty of a cut in May . Of course , that could be over optimistic . But the world ’ s largest and most important economy is performing well , and the central view has to be that next year it will avoid , or only have a mild , recession ; good news .
The ECB and BoE could not bring themselves to be quite so positive . However , where the Fed goes , others usually follow and that ’ s what financial markets are expecting , with interest rates to start falling in these regions in the spring of 2024 as well .
On top of that , the beleaguered Chinese economy , where the large and important property sector has been under pressure , was given a shot in the arm by the People ’ s Bank of China pumping record amounts of cash into the economy to provide support .
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