21 NOV, 2023
By Johanna Zidani from RankiaPro Europe
In the dynamic world of finance, the recent developments have sparked intriguing insights from key players in the industry. Orla Garvey, Senior Portfolio Manager for Fixed Income at Federated Hermes Limited, sheds light on the implications of the lower UK CPI print and its potential ramifications for the Bank of England's monetary policy. Meanwhile, Stephen Auth, Chief Investment Officer for Equities at Federated Hermes, provides a perspective on market expectations as we navigate through the end of Q3 earnings season.
This week’s lower UK CPI print was welcomed by the Bank of England with a sigh of relief. It opens the door to potential earlier rate cuts next year, or at the very least supports pricing for this in the UK front end market. Services CPI, which the Bank of England watches closely, is now even lower than their expectation. But there are still questions lingering in the air about whether the UK has a more persistent inflation problem. For that to be resolved we need to see core inflation moving lower and the labour market continuing to loosen. In our view there is more to come.
As we grapple forward through the end of Q3 earnings season, we expect markets likely to grind higher into year-end and through 2024. We remain tilted towards value stocks and underweight growth stocks and have been using big pullbacks such as two weeks ago to add to equity exposure. We also shifted to neutral in cash during the October pullback, ending nearly two years of overweight exposure to an easy-to-deploy asset class that also offered value in this higher-rate, challenging environment. We think forward returns on the overall market likely will be in the single digits, making stock picking more critical to stock returns.
By RankiaPro Europe