Markets have staged something of a recovery during recent weeks, and this despite a general lack of positive news. Well, I suppose there have been some glimpses of sunlight. The International Monetary Fund (IMF) expects interest rates to revert to pre-pandemic levels before too long providing, of course, that inflation is brought under control. And retail sales were remarkably robust last month, despite the more negative expectations that preceded the figures.
It seems that, as well as Mother’s Day prompting more spending, we have rediscovered the joys of home entertaining. Unfortunately, this has been at the expense of eating out, with restaurants reporting a drop in sales over the past year roughly equivalent to the rise in retail spending. Clearly the rise in the cost of living is prompting some lifestyle changes. But the overall picture was rosier than many had been led to believe
While hard economic news remains thin on the ground at this time of the year, companies will soon start sharing their experience of the first quarter with their shareholders. It will be the banks that will kick off the reporting season, with the first results due soon. Given the way in which interest rates have been marching higher and the upset to the banking sector brought about by the collapse of the Silicon Valley Bank and the enforced sale of Credit Suisse, these will be figures to examine with considerable interest.
We are now in a new tax year, but one in which the Capital Gains Tax regime is rather harsher. It should encourage private investors to take early advantage of the tax breaks still available, such as making contributions to an ISA. Investment is, after all, very much a long term commitment. As Warren Buffett once famously remarked, investment is all about time, rather than timing. And trying to second guess short term market movements is a mugs game, believe me.
For example, geo-political tensions remain all around the world, with China flexing its military muscles, the Middle East once again in turmoil and no end in sight to the conflict in Ukraine. It all serves as a reminder that in the investment world, nothing is ever certain. We have to hope these uncertainties do not derail the recent recovery in investment sentiment. After all, if the IMF is correct in its assumption, it will mean that inflation should come down all around the globe, with the US apparently leading the way. So let us hope the ground recently regained can be retained.