Guide to the Markets - J.P. Morgan Asset Management

Guide to the Markets

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Key takeaways:

In the third quarter of 2017, hawkish voices on the Bank of England’s Monetary Policy Committee (MPC) continued to increase their influence, with the Bank’s current messaging now indicating that more than one interest rate hike is likely. However, current macroeconomic trends lead us to believe that this will not mark the start of a traditional tightening cycle.

Guide to the Markets presents a wide range of macroeconomic data that can help liquidity investors assess the economic backdrop and position their portfolios, covering issues such as:

  • The MPC believes that positive macroeconomic trends—the continued fall in unemployment, the steady climb in inflation and the fact that the economy is doing better than it forecast post the Brexit vote—will reduce slack in the economy and lead to a pick-up in wages. (p. 4, 5, 6)
  • Conversely, the UK still exhibits a clear loss of momentum, with second-quarter GDP remaining at 0.3% quarter on quarter from 0.6% in the fourth quarter of 2016. Meanwhile, a reduction in real incomes has dealt a severe blow to the UK consumer, Brexit-related uncertainties are curtailing capital expenditures and foreign direct investment, and a property market slowdown is just beginning, in particularly in London, which could dent consumer confidence further. At the same time, inflation may have peaked due to base effects and the recent currency moves higher. (p. 4, 5, 6, 7, 8)
  • We expect rates markets to remain volatile through 2017. However, the challenges we still face mean we continue to forecast a slowdown in activity, which should limit the absolute number of hikes the MPC can justify.

As you consider these important topics, we will be happy to share our market views and tailor liquidity solutions to best meet your needs.