Investors have continued to digest last week’s strong US jobs report and updated policy guidance from the Bank of England (which we discussed here), whilst the reaction from equity markets has remained largely muted so far this week. Instead, continued positive updates from companies and encouraging developments on US infrastructure investment plans have helped lift equity markets.
Last night the US Senate passed an infrastructure plan that would lead to upgrades to the likes of roads, rail, utilities and communications. Boosting infrastructure spending has long been needed in the US but a lack of bipartisan agreement has prevented progress for decades. Whilst last night’s development is a clear positive and the investment would help lift the US economy, the bill still faces hurdles in the House of Representatives after they reconvene later next month.
The debate on the outlook for US and UK monetary policy is likely to continue through this week as later today the US will release July’s CPI inflation data and tomorrow the UK will release second quarter GDP data. With the coronavirus still impacting many geographies and sectors, we believe it is premature to call the end of economic support, and while policy may need to be adapted, it will continue to remain accommodative for some time.
Peter Quayle, Fund Manager