A days planning is done in the morning

Thursday was a busy day for central bankers as the Monetary Policy Committee released the minutes from their last meeting and announced there would be no change to interest rates this month. There was some suggestion after the recent weak economic data from the UK economy, as the Bank lowered growth forecasts, and the manufacturing base went into a technical recession after two quarters of negative growth that some members were tempted to vote for a cut. Adding to the gloom Mark Carney once again did his best to stir up fears over a Brexit vote, claiming it could lead to an economic recession. At this rate he will talk the economy into one.

Over the other side of the pond, post a stronger than expected jobless claims report several Federal Reserve members offered their views on the current interest rate environment. Boston Fed President Rosengren offered the view that traders are too “pessimistic” about the US economy and are “underestimating” the potential for rate hikes. Minneapolis Fed President Kashkari believes the market is too focussed on the Fed and should look at the economic picture more. Chicago Fed President Evans favours a wait and see policy, however he does expect the economy to grow by 2.5% this year. Finally, the view from Kansas Fed President is that interest rates are too low for current state of the economy. It would appear the Federal Reserve still have a June rate rise as a possibility. In common with the US equity market the US treasury market was little moved by these comments.

Currently it feels that equity markets in particular lack any form of conviction one way or the other. They don’t even seem to be moved by changes in the oil price. Post the corrective bounce from mid-February; developed equity indexes have tended to trade in a pretty narrow range. 

We are coming into the summer months. Wimbledon, The Open, Ascot to mention a few of the traditional events to take fund managers attention. Volumes tend to be lower and volatility higher as the lack of liquidity leaves markets vulnerable to whipsaw. A June rate rise would be announced on June 15th, right in the middle of Ascot week, what are the odds? 

Posted on May 13, 2016 .