What was and what is to be

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It was another good week for tech and a better week for US midcaps as the S&P 500 continued to push higher. A mixed bag in Europe and the FTSE 100 fell modestly over the past five days. Gold did little, the price of oil rose, US treasury yields continued to creep higher across the curve, and the US dollar fell modestly against its basket of other currencies. US politics is heating up ahead of the election later in the year, and as much is about the battle between Biden and Trump; it is possible neither could run in the end. Question marks over the state of Biden’s mental capacity continue to debate his involvement, as does the possibility that Trump, the subject of four felony indictments that could land him in prison, is not immune from prosecution.

This week, we get the latest inflation data in the US, which is expected to show another fall in the annual consumer price rate from 3.3% to 3% in January, further encouraging those who think a rate cut should be around the corner. Powell has stated that he wants to see further progress on inflation before cutting rates; what he probably wants to see, which he can’t say, is he wants some signs the US economy is faltering before cutting rates. A US economy growing at over 4% at an annualised rate does not warrant a cut in interest rates without the risk of stoking prices again will be his concern.

We also get the latest UK inflation figures this week; after last month’s uptick, the Bank of England is forecasting another monthly rise in prices before continuing its downward path to 2%. The UK economy is possibly proving to be slightly more resilient than some had forecast but economists predict on Thursday that UK economic growth will have contracted by 0.1% in the final quarter of the year. Higher prices and a lackluster economy do not make a good cocktail mix. The focus will soon turn to the Budget on March 6th, and one assumes that the leaks from the Treasury will start soon.  There is unlikely to be much in the way of good news this week coming out of Europe, as industrial production is likely to fall again this month.

As much as we tend to focus on the US stock market, which is natural, and there is never much shortage of commentary surrounding China’s economy and its woes, along with its current stock market troubles, much less is discussed about India and its stock market performance. This particular point was made to me over the weekend by a very wise relative who never felt compelled to invest in China’s stock market but had been a seasoned investor in India. John Authers, in his Bloomberg Daily comment, kindly and timely, gave an update on the relative performance of global stock markets over the past 20 years, and the winner is India, up over 600%, followed by the US, just under 500%, and Indonesia. The worst by some measures is Europe and the UK. Stocks in Europe are expected to open modestly weaker than the close on Friday.