The Cambridge Weekly – 8th August 2022

Markets bet on a perfect landing

Bad news filled the airwaves last week. Faltering global growth, higher inflation forecasts and rising interest rates set a dour tone – capped off by a geopolitical crisis in Taiwan. UK investors were struck by the Bank of England’s dire warnings: a 13% inflation peak and a protracted recession are now in store for Britons, according to Governor Andrew Bailey. Predicted to last for five quarters, the looming UK recession is set to outlast the one following the global financial crisis in 2008/09.

July review: a recovery from June’s pain, but markets still driven by yields

July was a great month for global investors. In sterling terms, the MSCI World Index climbed 6.8%, while bond yields fell across board, boosting bond values. Almost all the major equity indices we track saw significant gains with the exception of emerging market stocks, which traded mostly sideways but ended 0.4% down. Highlights came from the US, where the broad S&P 500 index jumped 9%. The Nasdaq – which houses America’s technology giants – gained a whopping 12.2%. This alone went some way to generating the healthy returns seen at the global scale. Even so, more economically challenged regions like the UK and Europe fared well – with the FTSE 100 gaining 3.7% on the month.

Energy profits here for a good time, not a long time

Energy companies prefer not to be in the news. Executives likely feel that right now more than ever, with media and political pressure building on their latest earnings figures. Centrica, the owner of British Gas, recently reported profit growth of 500% year-on-year for the first half of 2022. Meanwhile, Shell posted its best ever quarterly profits for Q2 and BP its highest profits in 14 years for the same period. All of this comes while Britons face eye-watering rises in energy and fuel costs. Naturally, the disparity has led to a great deal of negative media coverage.