Written by Anthony Walters – Clever‘s Head of ESG & Christos Chountoulesis our Investment Analyst, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Market Recap.
It was a strong week for the Nasdaq 100 ETF (1.76%) followed by the S&P 500 ETF (0.35%). The FTSE 100 ETF gained 0.16% whilst the Dow Jones was flat, returning -0.03%.
The Communications sector (which counts Meta/Facebook, Alphabet/Google, and Netflix among its top 10 holdings), gained 4.96% for the week on the back of strong corporate earnings. The Energy sector rose by 1.84%.
News.
European Central Bank policymakers on Friday raised the prospect of an end to the ECB’s steepest and longest string of interest rate rises, as the outlook for the euro zone economy worsened despite stubbornly high inflation. The ECB increased borrowing costs for a ninth consecutive time on Thursday (to 4.25%) but raised the possibility of a pause in September as recession worries mount.
Geopolitics.
Belarus applied in May to join the BRICS club of five leading developing economies, Russia’s RIA Novosti news agency reported on Tuesday. The BRICS countries Brazil, India, China and South Africa have all declined to join Western economic sanctions against fellow member Russia over its war in Ukraine, which Moscow calls a “special military operation”. They are due to hold a summit in South Africa in August.
Inflation.
The Bank of England (BoE) looks likely to raise rates by 0.25% to 5.25% on 3rd August, as UK inflation remains higher than in other big economies. Expectations for peak BoE rates reached 6.50% on 11th July after data showed record wage growth. But they fell back after a bigger-than-expected decline in consumer price inflation. Investors are now split fairly evenly between a peak of 5.75% or 6.00% late this year or early in 2024.
Central Banks.
The US Federal Reserve raised interest rates to a 22-year high on Wednesday as it continued its fight against rising inflation. The decision to increase rates by a quarter-percentage point to a range of 5.25% to 5.50% comes after the Fed paused its rate-rising cycle last month. US inflation has now declined for 12 straight months and is currently running at an annual rate of 3.00%, down from over 9.00% in June last year.
Commodities.
The Energy commodities gained the most this week, with Heating Oil (7.65%), Gasoline (6.01%), Brent Crude Oil (4.52%) and WTI Crude Oil (4.46%) all rising. Oil prices have risen for five straight weeks given reduced supply as a result of OPEC+ production cuts. Interestingly, Natural Gas was the laggard, falling by 4.33%, followed by Sugar, which declined by 3.68%.
ESG.
Walmart and PepsiCo announced the launch of a new strategic collaboration aimed at enabling the adoption of regenerative agriculture practices on more than 2 million acres of farmland in the U.S. and Canada. The company’s plan to invest $120 million focused on supporting farmers to improve soil health and water quality. Regenerative agriculture practices are aimed at addressing the environmental impact of the sector.
Week Ahead.
On Monday, the European Central Bank publishes the CPI Inflation figure, forecast to be 5.30% (5.50% prior). Tuesday sees the release of Manufacturing PMIs (Purchase Manager Indices) by the UK, US and EU, with all expected to signal further contraction.
On Thursday, the UK, US and EU publishes its Services PMI data, with all three expecting to report expansion in the demand for services. The Bank of England reports its interest rate decision on the same day.
Sources.
Anthony Walters – Head of ESG, Christos Chountoulesis – Investment Analyst at Clever Adviser Technology Ltd (Clever)
Market recap – Data sourced from FE FundInfo & Koyfin. ETFs quoted: iShares Core FTSE 100 UCITS ETF, iShares Core S&P 500 UCITS ETF, iShares Nasdaq 100 UCITS ETF. YTD (year-to-date figures quoted in Pounds Sterling).
News – As Japan aligns with U.S. chip curbs on China, some in Tokyo feel uneasy, by Tim Kelly, Karen Freifeld and Kentaro Sugiyama, Reuters, 24/07/23
Inflation – European stocks gain after U.K. CPI grows more slowly than expected by Peter Nurse, Investing.com 19/07/23
Central Banks – A ‘momentous week’ ahead as the Fed, ECB and Bank of Japan near pivot point, by Elliot Smith, CNBC, 24/07/23
ESG – Virgin Atlantic Plans First-Ever 100% Sustainable Aviation Fuel-Powered Transatlantic Flight this Year, by Mark Segal, ESG Today, 20/07/23
Geopolitics – Ukraine war: Wheat prices soar after Russia threatens ships, by Emily McGarvey, 21/07/23
Commodities – Data sourced from Koyfin and Investing.com
Week ahead – Data sourced from Investing.com
Risk Warning: These are Anthony’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
Regulatory Information: This is a general communication provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Marlborough or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine – together with their own professional advisers if appropriate – if any investment mentioned herein is believed to be suitable. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice.
All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Issued by Marlborough Investment Management Limited, authorised and regulated by the Financial Conduct Authority (reference number 115231). Registered office: PO BOX 1852 Lichfield, Staffordshire, England, WS13 8XU. Registered in England No. 01947598. The Clever Marlborough Model Portfolio Service (‘Clever MPS’) is a collaboration between Marlborough Investment Management Limited as the Discretionary Fund Manager and Clever Adviser Technology Limited, a company registered in England and Wales (company number 2910523) with registered office at Watergate House, 85 Watergate Street, Chester, Cheshire CH1 2LF (“Clever”). Clever is a technology and software provision company which developed a methodology and proprietary suite of algorithms for the monitoring, analysis, collation, and transmission of data on the performance of Investment Funds and related portfolios within the UK market which Marlborough utilises for investment purposes.