{"id":1994,"date":"2020-06-11T11:03:48","date_gmt":"2020-06-11T11:03:48","guid":{"rendered":"http:\/\/www.wealthatwork.co.uk\/jpm\/?p=1994"},"modified":"2020-11-18T09:52:55","modified_gmt":"2020-11-18T09:52:55","slug":"market-update-11th-june-2020","status":"publish","type":"post","link":"https:\/\/www2.wealthatwork.co.uk\/jpm\/2020\/06\/11\/market-update-11th-june-2020\/","title":{"rendered":"Market Update \u2013 11th June 2020"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><div class=\"vc_row wpb_row vc_row-fluid\">\n<div class=\"wpb_column vc_column_container vc_col-sm-12\">\n<div class=\"vc_column-inner \">\n<div class=\"wpb_wrapper\">\n<div class=\"wpb_raw_code wpb_content_element wpb_raw_html\">\n<div class=\"wpb_wrapper\"><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/JMAD-Lk5eh4?rel=0&amp;wmode=transparent\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"vc_row wpb_row vc_row-fluid\">\n<div class=\"wpb_column vc_column_container vc_col-sm-12\">\n<div class=\"vc_column-inner \">\n<div class=\"wpb_wrapper\">\n<div class=\"wpb_text_column wpb_content_element \">\n<div class=\"wpb_wrapper\">\n<p>Our focus yesterday evening (Wednesday 10 June 2020) was on the press conference from the Fed Chair, Jay Powell, for any hints on what the US central bank may do in the future following last Friday\u2019s (5 June 2020) stunning employment data (when 2.5m jobs were added).<\/p>\n<p>He acknowledged some of the points we have previously highlighted in these market updates, namely that Friday\u2019s 13.3% unemployment reading could be understated by several percentage points (<a href=\"https:\/\/www2.wealthatwork.co.uk\/mywealth\/2020\/06\/08\/week-ending-5th-june-2020\/\"><strong>please see here<\/strong><\/a>) and that the coronavirus lockdowns have disproportionately hit the low paid and those that have jobs with a high risk of layoff, such as restaurants, hairdressers and retail (<a href=\"https:\/\/www2.wealthatwork.co.uk\/mywealth\/2020\/04\/03\/market-update-3rd-april-2020\/\"><strong>please see here<\/strong><\/a>).<\/p>\n<p>However, Jay Powell delivered everything we wanted when he said:\u00a0 \u201cWe\u2019re not thinking about raising rates. We\u2019re not even thinking about thinking about raising rates\u201d.<\/p>\n<p>This was music to our ears \u2013 an absolutely perfect one-liner as it clearly highlights that the Fed is going to keep US monetary policy very loose for the foreseeable future.<\/p>\n<p>In fact he pledged to maintain the Fed\u2019s asset purchases at the present pace (which is $80bn a month for Treasuries and $40bn a month for mortgage-backed bonds) and projected US interest rates will stay near zero through 2022 as their preferred inflation measure, the core PCE, is likely to remain below their 2% target.\u00a0 Additionally, although he believes that US economy will contract by 6.5% this year before rebounding 5% next year, he stated that these were uncertain times as the coronavirus outbreak had caused the biggest economic shock in living memory.<\/p>\n<p>Elsewhere, US CPI data yesterday showed both headline inflation and core inflation (which excludes volatile items such as food and energy) dropped 0.1% in May, taking the inflation rates down to 0.1% and 1.2% respectively \u2013 the smallest core increase since March 2011.<\/p>\n<p>As we indicated yesterday, after the Chinese PPI data (<a href=\"https:\/\/www2.wealthatwork.co.uk\/mywealth\/2020\/06\/10\/market-update-10th-june-2020\/\"><strong>please see here<\/strong><\/a>), there is a growing risk of deflation.\u00a0 However, we would caveat that the coronavirus lockdowns are drastically changing consumption patterns, making the current actual shopping basket look very different from the weightings given to the various items in a \u2018normal\u2019 shopping basket.\u00a0 For example, due to the lockdown restrictions Americans aren\u2019t travelling as much (which resulted in airfares falling 4.9% and car insurance falling 8.9%) or buying as many clothes (2.9% cheaper) as they would normally, but they are buying more food for home consumption, which saw prices increase by 1% \u2013 and as a result, this all makes the reading slightly less representative of the prices American consumers are actually experiencing.<\/p>\n<p>However, looking at the individual elements, it still suggests to us that US inflation is running well below the Fed\u2019s 2% target \u2013 which provides us with additional confirmation that the Fed has to keep its monetary policy accommodating for the foreseeable future.<\/p>\n<p>While this is all good news for global equity markets, we have also previously warned that the path for financial markets will not be smooth and that we fully expect market volatility will remain elevated in the short-term \u2013 and unfortunately equity markets have fallen this morning as focus has now turned to today\u2019s US weekly jobless claims data and the potential risks of a second wave of coronavirus cases after the US announced that infections had passed the 2m mark.\u00a0 As we write, the FTSE-100 is down nearly 160 points, or 2.5%.<\/p>\n<p><strong>Investment Management Team<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n  <\/div> ","protected":false},"excerpt":{"rendered":"<p>Our focus yesterday evening (Wednesday 10 June 2020) was on the press conference from the Fed Chair, Jay Powell, for any hints on what the US [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"_links":{"self":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/1994"}],"collection":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/comments?post=1994"}],"version-history":[{"count":2,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/1994\/revisions"}],"predecessor-version":[{"id":2170,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/1994\/revisions\/2170"}],"wp:attachment":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/media?parent=1994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/categories?post=1994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/tags?post=1994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}