Market Update

Global Central Bank Activity
Bank of Japan (BoJ):
The week began with the Bank of Japan raising its key short-term interest rate by 15 basis points to approximately 0.25%. This decision led to a strengthening of the yen against the dollar, creating mixed implications for the Japanese economy. While the stronger yen benefits domestic companies and net importers, it raises concerns about the profitability of exporters and potential inflationary pressures. Markets are now pricing in the likelihood of additional rate hikes by the BoJ later this year, as policymakers continue to address upside risks to inflation.
Federal Reserve (Fed):
On Wednesday, the Federal Reserve concluded its two-day policy meeting by maintaining interest rates in the range of 5.25%–5.5%, as widely anticipated. Policymakers noted progress toward their 2% inflation target but acknowledged that inflation remains elevated. During his press conference, Fed Chair Jerome Powell left the door open to a rate cut in September if inflation trends align with expectations but stressed that decisions will remain data-dependent. The Fed’s stance indicates flexibility, with the possibility of either multiple rate cuts this year or none at all, depending on economic conditions.
Bank of England (BoE):
The Bank of England made headlines on Thursday with a narrow five-to-four vote to cut interest rates by 0.25%, reducing the benchmark rate to 5.00%. This marks the first rate cut since August 2023 and reflects inflation stabilizing at the 2% target in May and June. The decision brings relief to borrowers, especially mortgage holders, who have faced pressures from sustained rate hikes since December 2021. However, BoE Governor Andrew Bailey emphasized that rates are unlikely to return quickly to the ultra-low levels seen after the 2008 financial crisis. The move is seen as a positive step for consumer and business confidence, supporting economic growth into the year’s end.
US Labour Market and Economic Data
Later in the week, attention turned to weaker-than-expected US economic data. Unemployment claims rose, and PMI reports highlighted a contraction in manufacturing activity. The unemployment rate increased to 4.3% in July, up from 4.1% in June, with only 114,000 jobs added—well below forecasts of 175,000.
These signs of a cooling labour market raised concerns that the Federal Reserve might be falling behind in addressing economic challenges. However, it’s worth noting that central bank decisions are informed by emerging trends and consistent data patterns rather than isolated reports.
Market Performance and Outlook
Equity markets sold off to close the week, capping a volatile period. The S&P 500 faced pressure amid these mixed signals, with investor concerns about central banks’ ability to navigate shifting economic conditions.
While short-term volatility can be unsettling, it’s important to focus on the long-term perspective. Market fluctuations are a normal aspect of investing, and diversified portfolios are designed to mitigate downside risks even in challenging conditions. Historically, markets have reacted negatively when central bank decisions deviate from expectations, but these periods of uncertainty often present opportunities.
With lower trading volumes during the summer, volatility may persist into August, but we anticipate greater clarity in September as investors take up fresh positions. Our investment management team continuously monitors the market landscape, identifying opportunities to optimize portfolio performance. Short-term dips often create attractive entry points for long-term investors, which can drive higher returns over time.
Final Thoughts
While market movements can feel unsettling, staying invested and maintaining a long-term outlook is critical. Remember: it’s not about timing the market but time in the market that ultimately drives financial success. Patience, diversification, and disciplined investing remain the cornerstones of achieving your financial goals.