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

Guide to the Markets

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Key takeaways:

Despite the potential risks for the UK economy in light of Brexit-related uncertainty, we still expect steady growth this year and next. Lead indicators such as the Purchasing Managers’ Indices are still in the mid-50s (p. 5), indicating that we are not expecting any meaningful slowdown at this juncture. Considering recent hawkish rhetoric, the current economic momentum appears enough to justify further gradual tightening from the Monetary Policy Committee (MPC).

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:

  • Post-Brexit growth, despite being relatively poor, has continued to outperform the Bank of England’s expectations, leading to an upgrade to its growth forecast in the February inflation report. The BoE now expects the UK to grow at 1.7% this year, up from 1.5%. (p. 4, 34)
  • The currency-induced pick-up in inflation, which has had the effect of squeezing the UK consumer since the Brexit vote, now appears to be falling back towards target: a trend we expect to continue in 2018. (p. 33)
  • We are also starting to witness a pick-up in wage inflation, which certainly feels like it has been a long time coming. With unemployment at multi-year lows and a reduction of net inward migration, there appears to be little slack left in the economy. This metric will certainly be closely followed by the MPC as it tightens monetary policy. (p. 32).
  • Despite these signs of improvement, the Brexit overhang is still clearly impacting behaviour in the UK. The construction sector in particular has seen a clear deterioration in its fortunes. The export sector has also seen a slight slowdown in recent months, and the retail sector had a tough Christmas period. (p. 30)

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