Here comes summer

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As of the end of last week, the world of capital markets is pretty rosy; stocks, particularly the S&P, had another good week as tech stocks once again took the lead. Commodity prices are rising, copper close to record highs, and gold likewise. Bond investors are enjoying a solid month, as last week’s consumer price data gave hope that the path to the Fed’s 2% inflation target is back on track. The Vix fear index is right back at historic lows, suggesting that investors are feeling confident about the outlook for the months ahead as money continues to flow into equity and bond funds. Equity markets do not seem petered this morning by the news that the Iranian president has been killed in a helicopter crash. Possibly reigniting tensions in the region.

The week ahead will focus on the Fed minutes from its last meeting, in which markets sensed a slightly more dovish tone from its chair, Mr Powell. The monthly flash Purchasing manager surveys will also be released, a window into the state of the global economy. From April’s data, the biggest surprise was the acceleration of growth signalled by the United Kingdom composite PMI, which hit a 12-month high to outpace all other major developed economies and added to confirmation that the brief recession seen late last year is over. We will also get insights as to whether there are further signs of a slowdown in the US economy, and if the recovery in the European economy continues. This week, we get the latest UK inflation data, which is expected to report another fall closer to the Bank of England’s own target of 2%. The outcome of the report this week will further influence the debate on whether the members of the Monetary Policy Committee will be minded to cut interest rates in June. We will also see if all this good economic news is getting the buyers back into the shops as we get April’s monthly retail sales data. With Jeremy Hunt dangling the hope of easing fiscal policy, the economy on the up, wages growing at a real rate, and interest rates on the way down (we hope), it is possibly surprising that the incumbent party are having a better time of it in the polls.

Earnings season is coming to an end, and according to FactSet, for the first quarter, the blended (year-over-year) earnings growth rate for the S&P 500 is 5.7%, marking the highest year-over-year earnings growth rate reported. Since Q2 2022. One big name is yet to report and that comes this week in Nvidia, the latest stock market darling.