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Investment markets:

Three things you should know

Published: June 2022

It’s been an eventful year so far for investors with a handful of factors affecting market performance. Here are three key points we think worth knowing.

  1. Rising prices remain a big concern and could lead to more interest rate hikes, but the situation should change later this year
  2. The powerhouse economy that is China is showing positive signs
  3. The team at Coutts who manage your investments with us had already made changes to help navigate current conditions

1. Tackling rising prices

The price of goods and services continues to rise, with US inflation rising by 8.6% in May compared to last year, higher than expected. Central banks now have the challenge of trying to bring prices under control without stifling the growth of their economies too much – usually done by raising interest rates.

And for now, those rate rises keep on coming as their efforts to tackle inflation continue. Last week, the Bank of England raised rates from 1 per cent to 1.25 per cent, and the US Federal Reserve announced a rise of 0.75 per cent – its biggest hike since the mid-90s.

Climbing prices are likely to peak in the US later this year, but this might not be the case for the UK. Utility prices are expected to rise in October which, along with a relatively low number of workers available, could mean inflation stays higher for longer in Britain. 

2. China shows rays of hope

China’s strict zero-Covid policy caused its economic growth to go into slow-motion over the last couple of months. But that could be changing. People and businesses there are starting to borrow more, which is usually a sign of better economic activity to come.  

Being the second largest economy in the world, China is very important for global growth. So investors are keeping a close eye on the country.

3. We got this

The Coutts team behind our customers’ investments anticipated today’s challenging conditions and had already made changes to help navigate them.

These include:

  • recently investing more in US companies as they are currently well-priced and we expect inflation to settle in America later this year, which should in turn settle markets
  • cutting back on bonds before they were negatively hit by rising interest rates
  • reducing European equities at the end of 2021 in anticipation of a tougher economic outlook for Europe

 

Learn more about investments

Whether you’re an experienced investor or just finding out what investing is, we’ve got a range of articles to help you understand more about investing.

We regularly update our articles depending on what’s happening in the market so check back for future updates.

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