Mid market update: Inflation and the global market

By Acumen Financial Partnership Ltd

22 Feb 2023

Markus Spiske Xrify4ck1w Unsplash Scaled

By Daniel Frampton FPFS.

As the worries about prolonged inflation start to subside – there appears to be light at the end of the tunnel for developed economies. There have been three months in a row of CPI prints that have come in at or below expectations.

The general consensus is that inflation has peaked and over the next 12 to 18 months it should taper down to the Bank of England’s target rate. This is also the view for the United States which is positive as their markets make up the majority of global stock market capitalisation. 

Over the last 15 months, global markets have had to become steadily immunised to the rapid rising of central bank interest rates. The Chairman of the Federal Reserve in the US has repeated his “higher for longer” view in every speech he has made since the middle of 2022.

Unlike the Bank of England – who’s only target is keeping inflation under control – the Federal Reserve also have the target of keeping employment levels stable. Central banks do not have mandated targets regarding the value of assets – it matters not, to them, whether the stock/housing/bond markets rise, fall or stay flat. 

At this point in time, employment levels in the USA are at near record levels and inversely, unemployment leaves are at near record lows. This is in part helped by the cost-of-living increases and many citizens being forced to take a second job to make ends meet.  

WHAT IS THE BANK OF ENGLAND BASE RATE?
CPI is still far higher than central bank targets and with employment being strong, there is currently no reason for the Federal Reserve, the Bank of England and the European Central Banks to consider decreasing base rates at this time. 

The most likely outcome for the short term is that Central Banks reach their terminal interest rate and hold them there until either unemployment rises above targets or inflation falls below targets. At this point in time, the Federal Reserve have set an interest rate of 4.75% and their defined terminal rate is 5% – so, we are almost there. 

The next point of interest for markets is the corporate earnings landscape. As Consumers tightening their belts and the cost of production and energy is substantially higher than a couple of years ago. 

The question analysts are wrestling with at the moment is the extent to which profits will be hit across economies. We are in the midst of an earnings season and so far, earnings have been robust – with many companies meeting expectations and some exceeding them. 

There are a number of recession warning signs flashing but GDP growth remains relatively robust. We will continue to monitor the ongoing economic climate and ensure that any important news is fed back to you via our various means of communication. 

Even if a recession does become the base case – the stock market is forward looking and therefore, valuations will have likely accounted for this well in advance. In past recessions, the stock market usually starts recovering well before the economy reaches its worst point.  

As ever, the most proven strategy during periods of volatility is to remain invested through the peaks and troughs. If you would like to speak to one of our advisers regarding this, or anything else – please feel free to contact them at your earliest convenience to start your financial planning

Latest news

1

Dog greetings card firm lands John Lewis partnership Scoff Cards

Dog greetings card firm lands John Lewis partnership

22 May 2024

2

Online horse health retailer opens larger premises and first shop Hannah Wild

Online horse health retailer opens larger premises and first shop

22 May 2024

3

Net zero: Why SMEs are important Net zero.jpg.jpg

Net zero: Why SMEs are important

22 May 2024

4

Hotfoot designs new website for Cincinnati Shakespeare Company Hotfoot 2.jpeg.jpg

Hotfoot designs new website for Cincinnati Shakespeare Company

22 May 2024

5

Hyndburn's culture and community to connect at special event The Connecting Cultures event will take place at Haworth Art Gallery in June.jpg.jpg

Hyndburn's culture and community to connect at special event

22 May 2024

Lbv116 Ltb Strip980
Background image for hub sign up block

LBV Hub

Reach 50,000 members of the Lancashire business community

Post your news
Post your events
Post your offers
Company profile
Social reach
Magazine coverage
Sign-up
Events
Creative Lancashire Networking Social
Untitled design-4.png.png
LBV Hub Networking
23 May 2024

Creative Lancashire Networking Social

Society1 Coworking Space, Preston, PR1 3LT

17:30 - 19:30

Chamber Breakfast Networking
Chamber Logo1.png.png
LBV Hub Networking
23 May 2024 - 23 May 2024

Chamber Breakfast Networking

HIC, Lancaster University, Bailrigg, Lancaster, LA1 4AT

08:00 - 10:00

Business Networking in Lancaster - BNI Castle
EVENT LISTING BNI Castle.png.png
LBV Hub Networking
23 May 2024 - 23 May 2024

Business Networking in Lancaster - BNI Castle

Vale of Lune RUFC, Powder House Lane, Lancaster, LA1 2TT

06:45 - 08:30

Business Networking in Burnley - BNI Kudos
EVENT LISTING BNI Kudos.png.png
LBV Hub Networking
23 May 2024 - 23 May 2024

Business Networking in Burnley - BNI Kudos

Prairie Sports Village, Windemere Avenue, Burnley, BB10 2FU

06:45 - 08:30

Business Networking in Preston - BNI Brunch
EVENT LISTING SIZING Brunch .png.png
LBV Hub Networking
24 May 2024

Business Networking in Preston - BNI Brunch

Samlesbury Hotel, Preston, PR5 0UL

09:30 - 11:00

Business Networking in Blackburn - BNI Infinity
EVENT LISTING BNI Infinity.png.png
LBV Hub Networking
24 May 2024

Business Networking in Blackburn - BNI Infinity

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:30 - 08:30

Music In the Park
Music in the Park.jpg.jpg
LBV Hub Fundraisers
26 May 2024

Music In the Park

Worden Park, Worden Lane, Leyland, PR25 3DH

12:30 - 22:30

Business Networking in Chorley - BNI Endeavour
EVENT LISTING SIZING Endeavour.png.png
LBV Hub Networking
28 May 2024

Business Networking in Chorley - BNI Endeavour

Oak Royal, Bury Lane, Chorley, PR6 8SW

06:30 - 08:30

Business Networking in Blackburn - BNI Vista
EVENT LISTING SIZING Vista.png.png
LBV Hub Networking
28 May 2024

Business Networking in Blackburn - BNI Vista

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:45 - 08:30

Business Networking in Accrington - BNI Zeus
EVENT LISTING SIZING Zeus.png.png
LBV Hub Networking
29 May 2024

Business Networking in Accrington - BNI Zeus

The Mill House, Corn Mill Yard, Accrington, BB5 5HX

06:45 - 08:30

Business Networking in Preston - BNI Diamond
EVENT LISTING BNI Diamond.png.png
LBV Hub Networking
29 May 2024 - 29 May 2024

Business Networking in Preston - BNI Diamond

The Marriot Hotel, Garstang Road, Broughton, PR3 5JB

07:15 - 09:00

Business Networking in Lancaster - Eden Business Network
Eden Business Network.png.png
LBV Hub Networking
29 May 2024 - 29 May 2024

Business Networking in Lancaster - Eden Business Network

The Borough, 3 Dalton Square, Lancaster, LA1 1PP

18:30 - 20:30

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV116 Online Graphic
Subscribe now

Weekly news bulletin