After a very strong last quarter, January was marked by a pause in market performance, as both equities and bonds softened significantly. Geopolitical worries, whilst not being at the forefront of investors’ minds, are still present and the situation in the Red Sea is of particular interest.
In the UK, while inflation rates are lower than they were last quarter, the latest numbers were disappointing, indicating that a rate cut in March is unlikely. Markets were disappointed by the inflation path which then pushed bond yields higher. At the same time, the US economy continued to show further signs of resilience, while the rest of the world displayed signs of subpar growth.
However, there is a consensus that inflation has peaked globally. So, while some central banks maintained a cautious approach, signaling prolonged high interest rates, others indicated that the direction of travel is towards easing rates.
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