In this week’s market Pulse, Chief Investment Officer Bernard Swords discusses the rise of Covid as a major influence on markets last week. Bernard also discusses changing expectations around the timing of US interest rate hikes as well as strong economic data as the US powers out of its summer lull.
- Covid became the story that the market was once again following closely last week, with a rise in infections in Europe. Reopening stories were under pressure and the return to normality for these companies looks likely to be impacted. The markets also saw the shift to quality within equity markets, which is due to how companies are managing the cost and supply pressures which they face.
- Many Investment Banks are producing their outlooks for 2022, including Bank of America where it has turned aggressive on the timing of interest rate rises, with an interesting feature of it forecasts being the pace and the peak. It is expecting a 0.25% increase in Fed Funds per quarter and the peak to be between 2.0% and 2.25%, which can result in a benign interest rate cycle. There is not much expectations for downside left in fixed income markets and little disturbance for equity markets.
- It was a better week for data with very encouraging figures from the US. Strong figures within retail and industrial production, as it could indicate that we are passing the worst in the impact of supply chain rigidities. It was a flat week for index levels, and this was the US statistics that came in strongly and will offset any turbulence in the EU area which will push us on into 2022.