Knowledge and Insight - Economy

UK inflation may shock gilt markets this week. But if so it’s likely to be a passing phase as price rises continue to cool over the summer.

The UK labour market is in a huge state of flux. The population is ageing fast, people are retiring earlier and changes to immigration are leading to a lack of ‘unskilled’ workers.

UK inflation simply won’t drop as fast as everyone hopes, leading the Bank of England to admit it needs a new model. Meanwhile, a compromise is proposed to kick the can on the US debt ceiling till after the next election.

Inflation can often seem an abstract concept. Not lately, though: everyone is keenly aware of soaring prices. Is inflation finally starting to drop?

There’s a disconnect between how everyone feels and how stock markets are moving. Meanwhile, the US debt ceiling looms ever larger.

A King is crowned and most of England went to the polls last week. Coming up is a Bank of England rate hike and an update for American inflation.

Investors are fearful of an earnings recession as reporting season steams ahead. Meanwhile, China’s first-quarter GDP estimate suggests its recovery is proving uneven

Following China’s ‘great reopening’, growth is likely to accelerate this year. But we’re sceptical that it will be as successful as many are currently assuming. We expect the road ahead to be bumpy, the same sawtooth pattern that characterised other post-COVID re-openings. Longer term, this cyclical rebound is likely to give way to structurally slower growth.

Markets are riven over weighty questions about the economic strength of our households and businesses clashing with higher living costs, and all the while lurks the menace of unknown consequences created by a rapidly changed world.

Rathbones’ Edward Smith, co-chief investment officer, and Jing Hu, senior asset allocation analyst, give an update on some of the key themes shaping the investment outlook including the banking sector, the outlook for inflation and interest rates as well as a review of China.

We’ve certainly had a difficult start to the year, but what is the investment outlook as we look forward to sunnier days ahead? Our latest Investment Insights considers some of the key themes – such as expectations versus reality for US company profits and the search for inflation protection. 

Money was easy to come by in the 2010s, for businesses, households and governments. With interest rates now much higher, hard decisions loom.