- Yet there was one market, the gilt market, that didn’t like the rate rise. Or didn’t think a quarter point will be enough. As the chart shows, yields, which had climbed into territory they hadn’t been for a while, continued to rise, thus pointing to the prospect of a further rate increase.
- Yields in all major bond markets have been rising suggesting there is a risk that the rise in inflation and interest rates will be underestimated. It’s happened before during the expansionary phase following a mid-cycle slowdown. Equity markets have still done well up until crunch time, when higher interest rates have induced recession. We are a long way from that happening but the bond markets may be telling us that we are now on the road to that eventual outcome.
- That’s being unnecessarily negative - can’t imagine what’s gotten into us! Maybe oil prices will fall to $40 or less. The risks then for inflation and interest rates might be on the downside, though not if lower oil prices stimulate aggregate demand.
- Our caution on the equity market may prove to be wholly unfounded. We are most impressed with the way Nasdaq is leading Wall Street and if the US equity market continues to run, nothing including more rate rises will put other equity markets off. But that is an anomaly that is hard to accept and we still can’t help feeling cautious.
* The information contained in this report has been taken from public sources and is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Securities Ltd. No Director, representative or employee of Brewin Dolphin Securities Ltd. accepts liability for any direct or consequential loss arising from the use of this document or its contents. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchases or sale of such securities from time to time. In addition we reserve the right to act as a principal or as agent with regard to the sale or purchase of any security mentioned in this document. Prices, values or income may fall against the investor’s interests. You should therefore be aware that you may get less back than you invested. Past performance is not necessarily a guide to future performance. If you are in any doubt concerning the suitability of these investments for your portfolio, you should seek the advice of a qualified investment adviser.