The finish line in the race to cut interest rates in the US seems to be approaching, with relatively downbeat manufacturing data from the world’s largest economy last week fuelling fears of a broader economic downturn, and the worst day in the American stock market since the beginning of August. This data came ahead of a weaker than expected non-farm payrolls report on Friday which now leaves open the possibility of an aggressive 50bps reduction in rates at the Fed meeting next week.
By contrast, the UK manufacturing sector’s Purchasing Manufacturers Index survey came in at its highest level since June 2022, indicating that an economic recovery might still be gaining momentum whilst UK retail sales also enjoyed a further uplift, rising by an annual rate of 1% during August.
Elsewhere, the unexpected reunion of Oasis for a series of gigs in 2025 has cheered us 90s indie-kids up no end, but following a scramble for tickets, the conversation has moved on to the use of dynamic pricing. It’s a tactic already used very effectively by airlines and taxi firms etc, and in essence means that the price of a product fluctuates in real time based on demand levels and consumer behaviour. Is this really any different to the stock market though? Earnings multiples can expand significantly as investors are willing to pay more for a company’s future earnings, reflected in a higher price-to-earnings ratio and a more expensive valuation for those than buying the shares.
Just as some Oasis fans were prepared to pay an elevated price for their tickets, so will investors at times inevitably pay elevated prices for in-demand stocks. Whether the price paid can be justified is the question that should always be asked.
