Mixed messages dampen investor enthusiasm

In February’s episode of the Evelyn Partners Investment Podcast Cherry Reynard and Ben Seager-Scott examine the data emerging on the global economy – from weak technology earnings to buoyant jobs data, to falling inflation. The Federal Reserve, Bank of England and ECB all raised rates last week but gave few hints on whether the hiking cycle would draw to a close. How are these conflicting trends playing out in bond and equity markets?

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The data emerging on the global economy has been decidedly mixed. On the one hand, inflationary pressures appear to be easing, with a slow but meaningful drop in prices around the world. The Federal Reserve, Bank of England and ECB Central banks all continued to raise rates in January but have slowed the pace of increases. Nevertheless, they remain tight-lipped about whether a pause is likely.

In contrast, buoyant jobs data is still a concern. While there are mitigating factors for the astonishing rise in non-farm payrolls seen at the start of February, it suggests the Federal Reserve cannot take its foot off the gas just yet. Equally, with the US economy still registering buoyant growth, inflationary pressures could remain.

In markets, some of the more cyclical sectors are already feeling the pain. Technology earnings were disappointing, with clear signs that consumers and corporates are reining in their spending. Bond yields ticked marginally higher, as investors start to adjust to the possibility that rates would remain higher for longer.