Royal London Asset Management

There is a small gallery on the Wirral that houses one of my favourite pictures. Painted in the mid 19th century by William Holman Hunt, a leading Pre-Raphaelite artist, it depicts ‘The Scapegoat’, an animal that carries away human sins.

Last week saw three UK by-elections in constituencies previously held by the Conservatives. Two seats were won by opposition parties, following large swings; the other was retained, against most predictions. What can be read into these results?

Hubris: it is a strange word that conveys over-confidence. In last week’s journal I talked about Aviva and its 16% fee for a consent solicitation it was seeking on one of its bonds – a great result for us. News from Thames Water was the opposite.

Events in Russia dominated headlines over the weekend. As yet it is unclear what will happen and markets have remained calm.

Central bankers sprung no surprises last week. The US Federal Reserve (Fed) left rates unchanged, maintaining their 5-5.25% range. The consensus amongst economists is that this is a skip rather than a halt.

Last week was a waiting week. The focus was on the US Federal Reserve and whether we are about to see a pause in the rate hike cycle. We will soon know.

Despite strong employment data from the US last week there are signs that a global slowdown is underway.

Well, that was quite a few days in sterling bond markets. Last week I wrote about how central banks had lost their compass and were becoming ‘data watchers.’ This week I am reflecting on a dreadful set of UK inflation data and, again, the implications for interest rates.

Inflation is a funny thing. We observe price levels in everyday life, not the rate of change in those prices.

The Bank of England (BoE) is in a bind. It anticipates that inflation is going to fall quickly during the rest of the year, but its credibility is being tested.

Who would have thought that the British pound would be the top performing major currency last quarter?

I could write about the relative stability of bond markets and the unwinding of some of the more aggressive interest rate cut calls.

It was my birthday last Monday, and I took the day off work, which I don’t usually do on my birthday but I’d planned for it and, I have to say, it made a pleasant change.

The current banking crisis is a great illustration of how markets work and why economics is not a science – despite attempts to convince that it is.

Last week saw the failure of SVB Financial Group, the parent of Silicon Valley Bank. SVB is a commercial US bank that primarily serves technology and life science companies, with deposits significantly placed in US treasuries.

The UK’s reputation has suffered in recent years. Chaotic government, threats to repudiate international treaties, a diminished standing on the world stage – a preeminent 19th / 20th century power living on past glories, mired in nostalgia but unable to learn lessons from history.

There are stirrings on the political front. The resignation of Nicola Sturgeon as leader of the Scottish National Party (SNP) will have repercussions throughout the UK.

The UK is not in recession but nor are we growing. Q4 growth was zero, having fallen 0.3% in Q3. Not a technical recession – that is yet to come. The breakdown was a bit mixed. Surprisingly, fixed investment was up 1.5%, contradicting the downbeat nature of recent surveys.