Despite schools having broken up for the summer holidays and families rushing off to their holiday destinations, always assuming their plans are not disrupted by queues at ferry terminals or in airports, investors have a great deal to take on board at present. Aside from a raft of results from a wide variety of companies on both sides of the Atlantic, interest rate policy has moved to centre stage.
Already the European Central Bank has turned more hawkish in its approach to interest rates in order to combat inflation, adding 0.5% to the key rate – the first increase in eleven years. True, this actually brings the headline figure to a fat zero, but it is the end of a lengthy period of negative interest rates. With inflation running at 8.6% and a sharp rise in the price of gas in the pipeline, it seems inevitable that further increases will follow.
On the other side of the Atlantic, the increase of 0.75% announced by the Federal Reserve Bank this week shows how concerned they are about the accelerating rate of inflation. There, the cost of living is rising by more than 9% - the fastest increase in four decades. This is now the fourth time the rate has been raised and, as elsewhere, this could be just the beginning. For us, we must wait until early August to see what the Bank of England has up its sleeve, but we should expect dearer money.
On the corporate front, American technology giants have been among those disclosing their half year progress to investors recently. Apple, Amazon, Microsoft, Meta (as Facebook is now known), and Alphabet – Google's parent company – are all in the mix. Back at home, we have heard from Unilever, Shell, and several UK banks. As the summer progresses, the flow of results will, if anything, intensify. And there will doubtless be plenty of economic news now that the second quarter is behind us. There will be a lot to get our teeth into.
But the rise in the cost of living seems bound to remain a cause for concern. Western governments will be bracing themselves for a sharp slowdown in economic activity as central banks seek to bring inflation down to a more acceptable level. In Europe, the situation can only be exacerbated by Russia’s decision to restrict further gas supplies. It seems that market shifting news will be ever present this summer. Let’s hope this bleak outlook is mitigated by good weather, though a bit of rain would be welcome.
