It's all about interest rates

Our first ever investment conference was held recently – and most successful it was, too. The background was a subdued market where the FTSE 100 Share Index had lost a little over 1% in the week before – hardly a game changing experience and nothing that a good day’s trading shouldn’t recover.

Oil had recovered a bit, though Brent crude is still trading below $50. And the pound had recovered a little against the eur o to stand at around €1.40, to stand at a little over 71p.

Much was made of the Fed’s failure to raise interest rates yet, with some commentators believing they may have missed the boat. Certainly, economic growth appears to be softening over there, while elsewhere around the world doubts are growing over the sustainability of the global recovery. Interesting timing, given that the Bank of England is about to announce its decision on interest rates.

Actually, this particular interest rate announcement is something of a foregone conclusion as nobody expects the Monetary Policy Committee to raise interest rates. The Bank’s Quarterly Inflation Report, published the day of the announcement, could make more interesting reading. Inflation has been subdued of late, but there is an expectation that Bank economists will start pricing in a rise towards the 2% target figure over the next two years, which could lead to a rate rise late next year.

As well as giving market analysts something to get their teeth into, this report will be accompanied by the minutes of the last MPC meeting. Nine people sit on this committee, with just one having voted for a rate rise in previous meetings. It will be interesting to see if this lone hawk is joined by anyone else. Still, few believe Governor Carney will act before the Fed in raising rates.

Meanwhile, concerns continue to mount over the strength of the Chinese economy – another important topic at the conference. Recent figures suggest a contraction in manufacturing industry there, while the drop off in demand for many basic raw materials has hit those emerging countries dependent on commodities for growth hard. However, guest speaker Fiona Manning of Aberdeen Asset Management, which enjoys a strong reputation in these markets, pointed to cheap share valuations and better longer term prospects.

As the nights draw in, it does seem that ther e remain sufficient worries for investors to act as a brake on markets. The conference did, though, highlight that even in uncertainty there will be opportunities. Several speakers pointed to the lack of a crystal ball when it came to making definitive judgments, but the overall tone was positive. Perhaps this will be the start of a regular feature in the JM Finn investment calendar.

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