Following on from my last blog, we have now seen the outcome of the Bank of England decision on interest rates, namely to raise them by 0.75% (I lost that bet as I thought that they would go for a full 1%). This is in line with the United States decision to do the same with theirs the day before, but we still lag behind other countries in terms of our interest rate rises to date and our high levels of inflation, so there is more to do and this may be made clearer in the Chancellor’s forthcoming budget announcement, possibly in the days ahead (unless it is postponed again!).
In the meantime, sharemarkets enjoyed a good day on Friday, as there was an expectation that China may start to relax their covid shutdowns; however this does not now seem to be the case and as we already know, the longer that there is economic inaction, especially within such a productive global power as China, the more embedded the issues become and, whilst it is clear that China’s re-opening would herald a postive sigh of relief for markets, it will now have left something of a scar on their economy, from which it may take more time to recover.
Our new Prime Minister seems to be suggesting that he will look to provide postive solutions to our ailing economy rather than just taxing the life out of it, which hopefully is a sign that he genuinely understands the problems that people and many businesses are now facing, but the devil will be within the detail in the forthcoming budget and it will be interesting to see where and how the funds will be raised in order to bail out our economy in the immediate and also how investment markets will react to this news, although I suspect that they may already have most of the answers to those questions.
It is now becoming clear that the UK is already in recession and that this negative spiral may continue for the next year, but I think that in all honesty it was difficult not to foresee that there would be issues arising from the Ukraine conflict and its affect on many resource supply chains, as well as the issues surrounding the recovery from a global shutdown; however this is a part of why the markets have fallen during this year and as signs of a move from the bottom of the current cycle become evident, then we should hopefully start to see investment markets react positively as they plan the route ahead and out of recession.
It is a case of where and how many bumps there may be in that road of course!