The confidence discovered by investors towards the end of 2023 hasn’t really continued, with the FTSE100 down about 1.4% in the first couple of trading weeks and there are a few things that will need to be watched closely in the short term. After a decline in UK GDP of 0.3% during October, subject to any revisions the data for November showed that the economy expanded by a similar figure. Whether the UK has entered a recession or not is now solely dependent on the GDP data for December, which will be released on 15th February.

As readers will know, a technical recession is defined as the economy shrinking for two consecutive quarters, but most definitions also include words like significant, widespread and prolonged. We’re not there yet and whilst the wider media will undoubtedly provide much commentary on the outcome, it seems unlikely that it will make much of a difference to the way we are all feeling either way. Jeremy Hunt insists that the medium-term outlook for the UK is far more optimistic than the numbers suggest – the cynics amongst us might suggest we would expect nothing less from a Chancellor at the beginning of an election cycle.

Perhaps more troubling is the uptick in US inflation last week which might reverse some of the market’s more aggressive rate cut predictions. We have already seen similar rises elsewhere following a pause in the rate cycle – Canada in September and Germany in December are two good examples, and whilst markets have seemingly shrugged it off so far, rising tensions in the Middle East could yet pose a significant risk to the oil price, which as we know, can prove a further negative for inflation.

Please note that the value of investments and the income from them can go down as well as up and you may not receive back all the money invested. Past performance is not a reliable indicator of future results. Any views expressed are those of the author.

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