4 November 2016

BOE: Bank on track.

Today’s BOE decision represents a correction in UK policy makers’ thinking. The sudden stop in activity which was implied by the Bank’s August stimulus package has not materialised and the focus has instead returned to significantly above-target inflation by 2018. This is going to be supportive of sterling, especially as consensus views on the exchange rate had become so negative.

RSS - Strategic Insight
Sector report cover
*Multiple Sectors
Illumination: Equity strategy and market outlook

In this month’s strategy piece, Alastair George highlights that the standout market event during February was the discontinuity in equity market volatility. In his view, renormalisation of monetary policy will over time have a much broader impact on asset prices. In particular, this volatility episode adds to the weight of evidence that market risk premia will also revert back to more normal levels as interest rates rise. There has, however, been no evidence in recent weeks that economic fundamentals are weakening. While recognising the growth dynamic is strong for the moment, he continues to believe equity portfolios should now be tilted towards sectors that have offered a degree of resilience. Bond yields may have risen substantially since he highlighted anomalously low yields in December, but on balance the risks still appear to the upside.

Download the report