Marcus Ashworth, Head of Fixed Income for Haitong Securities, speaks on the interest rate scenario in US and UK, and why equity remains a good relative investment.
Fed looking at external impact
On China, Ashworth notes that their short-term growth isn’t going anywhere and the official forecasts are heading down. He adds that central banks being worried about China is an interesting topic.
On the Fed, he mentions that the central bank is looking at external impact properly and this will affect the markets. With the US failing to see a rate hike, he believes that the European Central Bank will have to do more themselves to facilitate a lower EUR and thereby growth in the Eurozone.
US rates: Less chance for an October hike
With Fed opting to keep rates unchanged in last week’s FOMC meeting, Ashworth believes that even the October chance for a rate hike is small. He adds that in the October FOMC, the Fed will put out a statement again that every meeting would be a live one. This would mean the markets will see further uncertainty ahead and equities will struggle to go higher – Overall, it would be a trader’s market.
Bank of England rate hike
Ashworth says that with the UK wage growth looking better than US, the expectation of a 3-4 month gap in UK rate hike after the Fed lift-off begins has narrowed. He further mentions that the Bank of England won’t move ahead with raising rates before their US counterpart.
UK Equities: A better relative investment
Ashworth notes that equity valuations remain an issue, having edged higher and higher, but believes that they remain a better relative investment when compared to fixed income, thereby suggesting a buy on dips approach for UK equities.
Share
