A game of two halves

Some weeks just lend themselves to the easiest titles… With the start of the ‘Euros’ good luck to your team, or for your sanity if you aren’t a football fan. For the first half of this week’s review, politics, or: Manifest oh…

Here in the UK this was the week of the Manifesto. Labour remained in safe mode, with Sir Keir Starmer leaving the rabbit firmly in the hat. Tax changes were limited to non-domiciled, VAT on private school fees, big energy firms and a clampdown on avoidance. No explicit mention of capital gains tax (outside of Private Equity) or inheritance tax schemes or immediate pension reform fees is positive for the investment sector.

For the Conservatives there was a focus on home ownership with a resurrection of the help to buy scheme, making the stamp duty threshold permanent, a tax break for landlords who sell to tenants, and a commitment to ban no fault evictions. There was also support for the self-employed and renewed commitment to stem immigration.

Outside of the UK, Belgium also held a general election, whilst in South Africa the ANC appealed to other parties to help form a government. We will be releasing our thoughts on what elections will mean or markets in the coming weeks. For now, onto the week in markets.

Lead by the S&P with a return of 1.3% which touched new highs along with the more technology focused Nasdaq, global markets returned 0.8% in sterling terms which was itself slightly weaker versus the dollar. Closer to home markets were negative with Europe suffering declines of 1.9%, with limited countries escaping the falls – France was down by 2.7%, Germany 1.3% and at home here in the UK the FTSE 100 fell by 1.2%.

In fixed income markets returns were more positive with the 10-year gilt yield falling to 4.05%. US Treasuries were also strong returning 1.4% on the week.

As always there was a focus on what the FED may or may not do. In line with expectations – they made no changes to interest rates and were unanimous in their decision. However, the ‘dot plot’ which seeks to give some insight on how members may vote in the future was mixed with four members suggesting no cuts this year, seven for one and eight for two cuts. Whatever the outcome it is less than was expected at the start of the year.

Inflation in the US came in at 3.3% year on year whilst expectations of 2.8% by the end of the year remain above the 2% target.

Not quite an own goal but not helpful for Rishi Sunak – UK growth stalled in April. Whilst some of this was blamed on the Great British Weather, economists are broadly positive for the second quarter, it is likely to be all to late for Sunak. Unemployment also ticked up in April to 4.4%, a touch more than expected.

Finally, Apple took a bite out of Microsoft – once again becoming the world’s largest company by market capitalisation – a mere $3.3 trillion.

Paul Surguy – Managing Director, Head of Investment Management