Quarterly Investment Outlook – Q3 2024
The global economy slowed down somewhat in the first half of the year, as rate hikes in the previous months moderated demand. However, growth rates are still mostly positive, without major recessions.
Bank of England cuts interest rates for the first time since 2020
Published 05 Aug 2024
As expected, the Bank of England (BOE) has cut interest rates by 0.25%. This is the first rate cut in more than four years and it appears that the Bank of England is finally prioritising growth over inflation.
Headline inflation in the UK is already at the 2% target but services inflation remains stubbornly high at 5.7% in June, meaning a cut was never a certainty and the 5-4 in favour of cuts shows this.
However, we do still expect the BOE to cut rates by another 0.25% this year, probably in November. The decision to ease financial conditions should probably have been taken in June given the weakness of the economy, but the election was likely the reason why the Bank decided to delay the announcement until August.
Ben Seager-Scott, Chief Investment Officer
This world is getting more volatile
John Buchan (1875-1940), First Baron Tweedsmuir, author of “The Thirty-Nine Steps” and General Governor of Canada once said: ''You think that a wall as solid as the earth separates civilization from barbarism. I tell you the division is a thread, a sheet of glass. A touch here, a push there and you bring back the reign of Saturn.''
Dissecting the market correction
In the last three weeks, global stocks have sold off, wiping out nearly $3tn or -4.5% of their global capitalisation, while global bonds have gained +3.5% by the close of Friday 2 August. Just this morning, Japanese stocks (which trade between 24:00 and 06:00 in UK hours) fell by -12.4%, the worst single-day drop since 1987.