Weekend ending 20/09/24 – Inflation tamed?
This week's podcast sees Jeremy and Gareth discuss the 50-basis point cut from the US Federal Reserve, who have previously told us that inflation is pretty much under control and the primary focus is now saving jobs (the US has a dual mandate, unlike the UK Central Bank).
But there is risk - Jeremy highlights that the last time the Fed cut rates by 0.5% in one go was (coincidentally also September 18th) back in 2007...at that time, perhaps the Fed knew some things that the rest of us didn't, but either way, the following 15 months saw the S&P halved in value under what we now know as the Global Financial Crisis. This time, we're all hoping it is different. All perhaps except Donald Trump who is saying that the Fed must think the US economy is in very bad shape...
UK inflation was static this week at 2.2%, and rates were held steady.
UK markets saw a flood of corporate reporting, which was generally on-track with expectations. Progressive had four clients with news - Springfield Properties (Scottish housebuilder) saw debt reducing and returned to paying a dividend, alongside an extension of our forecasts by another two years. Printhead specialist Xaar delivered a solid and in-line H1, with material opportunities in markets not traditionally associated with printing (coatings for EV batteries, and jewelry molds) although they are still reliant on some more-traditional product launches by customers to help deliver the second half of the year. DP Poland reported that its Domino's Pizza businesses in Poland and Croatia performed very well across their H1, with more store openings planned, happy customers and early signs that they are attracting franchisees, whose efforts and capital could further accelerate performance and improve returns. Finally, Mongolian oil & gas explorer Petro Matad may no longer be an "explorer"...their plans to move to production at the Heron field took a step closer, with a deal close to finalisation allowing product (due to begin flowing in October) to be transported, stored and then sold through a neighbouring oilfield.
Returning to the theme of a possibly-slowing US economy, UK investors were reminded of the risks by TT Electronics...their warning seemed to be operational rather than economy-induced, but clearly signals that all is not always gold across the Atlantic. Keep an eye on FX translation of US profits to Sterling - the dollar has been weakening for some time.
Next week looks quiet, with inflation and interest rates data from Japan (spoiler alert - post our recording, at 2.8% inflation was as expected, and rates were held) and US Core PCE inflation due next Friday.
This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.
Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position, and/or may perform services or solicit business from, any of the companies or related securities mentioned.
Any prices quoted in our research are as at the previous day’s close.