Week ending 16th September 2016.

Despite comments from Lael Brainard, a Federal Reserve Governor (Fed), global equity performance was mixed with markets continuing to focus on central bank policy – there is growing concern that global central banks are becoming less willing to continue supporting economic growth with loose monetary policy.

World Markets
Lael Brainard said the case to raise US interest rates was less compelling given few signs of inflation – Fed policy makers meet on 20-21 September to discuss US interest rates.

Recent comments from the committee’s voters have been inconsistent about whether or not they will increase interest rates.

Recent economic data out of the US has been below expectations, while the Personal Consumption Expenditures price index, which is the Fed’s preferred inflation gauge, has undershot the Fed’s 2% target for the past 46 months and is currently just 0.8%.  Consequently, despite the Fed’s desire to raise rates this year, I believe the Fed is unlikely to raise rates in September – especially given the potential uncertainty ahead of US Presidential elections on 8 November.

In the UK, the Bank of England’s Monetary Policy Committee left interest rates unchanged at 0.25%, but indicated it could ease again before the end of the year if necessary.

Concern over the health of Italian banks and an upcoming government meeting on 26 September to set the date for a constitutional reform referendum, meant that the FTSE MIB Index was among the worst performing markets.

Ian Copelin, Investment Director