Weekly Market Update- Week Ending 26/08/2022

This week, investor thoughts were centred around what would be discussed and announced at a conference based in the unlikely location of Jackson Hole, Wyoming. Set in an idyllic mountain resort, the annual event (first held in 1981) sees the world’s top central bankers, finance ministers, and academics discuss the challenges for the global economy in the period ahead. A packed agenda will focus on the task of walking the tightrope between taming inflation and avoiding a prolonged recession.

Investors will be listening intently for an indication of where interest rates might peak and what the size of the next rise could be when the Federal Reserve (Fed) meet on the 21st of September. The Fed committee agreed at the last meeting that interest rates needed to continue to rise but it remains to be seen whether they increase by 0.5% or 0.75%.

Whilst most major economies have been fully open for the majority of the year, China has spent large periods under lockdown. This, coupled with a property market crisis, has seen concerns mount for the state and direction of their economy. To help combat this, on Wednesday China’s State Council detailed a 19-point policy package aimed at stimulating the economy through increased infrastructure spending. It also pledged to continue to lower borrowing costs and to introduce policies to assist the development of private businesses.

Whilst this may encourage economic growth, with political risk remaining at elevated levels, global investors will need to be satisfied they are being compensated with a higher potential return before increasing exposure to the region.

John Naylor, Chartered FCSI – Head of Investment Committee