Proactive Investors – There have been more reasons for UK investors to be more optimistic in recent days (though with supermarkets rationing food, real wages still down and a whole host of other geopolitical worries in the background, it’s all relative).
However, the performance of the FTSE 100 this week also shows that sometimes good news is bad news for the market, which you don’t need to be a blockhead to think is being rather silly.
Anyway, here are some reasons to be cheerful, one, two, three.
Inflation
Too short to be haughty: the UK is not alone in trying to make the best of an extended period of high inflation, which has topped double figures since last summer.
It had been expected that consumer price inflation would still be around 5% in this coming autumn, but thanks to lower energy prices and some other factors, economists at Citigroup (NYSE:C) now forecast inflation will fall much faster.
CPI should tumble to below 5% by July and around 2.3% by the end of the year, with a dip below 2% early next year.
Recession
A bit of grin and bear it: the more encouraging data emerging on the economy also led another major investment banks to make a more optimistic tweak to their forecasts for the year ahead.
A recession in the UK is no longer likely, JP Morgan said, thanks to lower gas prices and unclogged supply chains and improving business confidence.
The working folly: the jobs market looks reasonably healthy, though again it depends on your perspective.
Unemployment remained at 3.7% according to the latest update, with average earnings up 6.7%, or 7.3% in the private sector, and the number of payrolled employees for January 2023 showing another monthly increase to 30mln.
Interest rates
But depending on whether your priorities are as a saver, climbing the property ladder or running the Bank of England, the resulting impact of these improving economic factors on interest rates means different things for different people.
For most economists, it means that another interest rate hike is very likely at March’s monetary policy committee meeting, though the following MPC get-together, in May, is still up in the air.
But even that represents a notable change following the hikes from 0.25% to 3.50% last year.
Read more on Proactive Investors UK
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