Which economic indicators should investors follow?

0
Written by: Margaret Lawson
24/11/2015
A lack of clarity on global growth and the US Fed’s next move have brought a note of caution into the market.

Although investors are not currently worrying about the eurozone periphery, currency wars, or growth in China, there are always new fears in the headlines. Amidst this noise, are there indicators that give a more consistent guide for investment strategy?

The headlines have distracted attention from one of the biggest issues, US dollar strength. This is linked to the issues of whether inflation will return, and if emerging economies will face credit problems.

With low commodity prices, growth in the supply of dollars globally has slowed. This impacts emerging market borrowing, which has been helped by an easy supply of cheap dollars. Many emerging economies are now seeing weak bank lending, but have limited policy options if they are also to defend their currencies. A US interest rate rise may exacerbate disinflation.

Despite the apparent robustness of the US economy, the jury is still out on global inflation versus disinflation.

Some soft commodities – cotton, orange juice and sugar, for example – have bounced recently. But many others remain extremely weak. The price of iron ore and steel remains depressed. Investors should be vigilant for any broadening of commodity price recovery.

Similarly, US wage growth would be an indicator if it broadens from simply reflecting current skill shortages. However, the disinflationary pattern may persist. It is triggered by weak productivity growth, resulting from a lack of opportunity for productive investment for all the money that is being printed. Against this background, our strategy is to focus on shares of businesses with genuine underlying growth and some potential for self-help.

Mixed signals in the UK mean that an interest rate rise may be deferred. Inflation is likely to remain low and UK growth will continue.

Margaret Lawson manages the SVM UK Growth fund

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Sell in two weeks or your estate agent ‘will lose interest’

Estate agents lose interest in a property if it hasn’t received any offers after just two weeks, a survey suggests.

Close