Market Update

The past two weeks in the equity markets have demonstrated the non-linear nature of market movements, emphasizing the need for measured responses rather than impulsive decisions.
Following the previous week's market decline due to President Trump's Mexico tariffs, the focus shifted to the Federal Reserve (Fed) this week. The prospect of an interest rate cut provided a boost, aiding the global equity markets in recovering lost ground.
The St. Louis Fed President, James Bullard, set a bullish tone, indicating that US interest rate cuts might be necessary soon to counter slowing economic growth resulting from escalating trade tensions. Subsequently, the Fed Vice Chair, Richard Clarida, emphasized that they would act appropriately if they sensed economic slowdown.
We have been advocating for lower US interest rates due to undershooting inflation and mediocre economic growth. The recent comments from Fed officials suggest that the Fed is now open to a rate cut, serving as a significant catalyst for the recent market rally.
The crucial question now is whether the Fed will implement a rate cut at their next meeting on June 18-19, 2019, or if they will prepare the ground for a cut at their July meeting, aiming to avoid looking overly reactive.
Adding urgency to the need for a rate cut was today's (June 7, 2019) US employment data. Payrolls increased by a mere 75,000 (consensus estimates were 175,000), and last month's gain was revised down to 224,000 from 263,000. Additionally, average hourly earnings growth slowed to 3.1% from 3.2%.
In Europe, there is also a case for a dovish stance after Eurozone CPI inflation slowed on June 4, 2019. Headline CPI dropped to 1.2% from 1.7%, and the core rate fell to 0.8% from 1.3%. Despite these numbers, the ECB monetary policy meeting on June 6, 2019, was not as dovish as expected. While interest rates were not cut, Mario Draghi, the ECB President, assured that the ECB would support the Eurozone economy, acknowledging discussions around a rate cut or restarting QE.
Looking ahead to next week, the UK will release employment data (unemployment rate and weekly earnings), the US will publish CPI and retail sales figures, and China will announce retail sales and trade data. Additionally, the G20 Finance Ministers and Central Bank Governors Meeting in Japan might provide insights into the impact of ongoing trade tensions and tariffs.
In recent news, Neil Woodford, a prominent UK Fund Manager, suspended investor redemptions from his Woodford Equity Income Fund. Although this situation has garnered attention, it is important to note that we do not include this fund in our client portfolios. At my wealth, we prioritize risk management alongside investment performance. We ensure our clients' exposure to the UK is through large blue-chip companies, easily liquidated at short notice. Our global exposure is diversified across various funds, scrutinized through meetings with leading fund managers and analysts. Furthermore, our active, discretionary approach enables us to adapt portfolios promptly to changing market conditions.