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Market odds for the Bank of England to cut rates in August are better than 50:50. We are less optimistic.

 

Life under Labour: what is the macro background for the new Government, their likely budget plans and the impact on the economy?

Peter Smith and Dean Cook take a look at how markets fared in May with global equities back on track and US and European stock markets hitting all-time highs.

I think the pessimism over the failure of US inflation to keep falling should reverse over the next few months. That should halt the steady decline in the scale of expected interest rate cuts across Europe, UK and US. Current expectations are 75 basis points (bp) off in Europe but only 50bp in the UK and even less in the US. That’s a dramatic change compared with the optimism we saw at the start of the year.

Rate cuts have preoccupied financial markets since the start of this year. Inching towards June and the first central bank is yet to blink. The US Federal Reserve had, until very recently, been expected to take the lead. A series of stronger US CPI readings in the first quarter, largely revolving around the stickiness of core services inflation, seems to have put paid to those expectations. The April CPI figure wasn’t as bad as feared but ‘shelter inflation’, known more universally as housing rental costs is still persistently high. Now Europe has pushed forward as the more likely first contender, with June cuts being pencilled in.

Read about our latest review and find out why we've added global infrastructure.

Newton head of mixed assets investment Paul Flood assesses some of the investment opportunities and themes stemming from this year’s global elections.

With real rates rising as inflation falls, we explain why central banks should consider cutting interest rates soon.