It has felt like many investors have just been treading water today ahead of what is going to be quite a week for markets. Not only do we get the latest rate hike decision from the US Federal Reserve, which feels fairly nailed on at 75 basis points, but earnings season hits its crescendo.
Financials, commodities and value stocks seem to be the name of today’s game as investors consider which sectors will have stayed coolest in a red-hot inflationary environment.
“There will be a lot of interest this week around the extent to which Lloyds and other banks are beefing up their safety cushion as recession talk gets louder. Likewise, markets will also be looking for any clues interest rates are cooling the UK’s housing market and nipping into demand for new mortgages.
“Investors will also be wondering how the travel sector is navigating current turbulence. Staffing has been a massive issue and companies are having to pay more to recruit and retain people. The stress of the job and the unsociable hours are a hard sell in a tight labour market, and a new survey by UK jobs site CV-Library throws the situation into stark relief with 40% of airport workers saying they are looking for the exit.
“Airlines, airports and travel companies will have to think hard about pay, conditions and extra perks that might pull new talent in and prevent current staff from walking out. Ryanair’s better than expected performance came with a warning that recovery is fragile and with EasyJet posting its update tomorrow investors will get a little more insight into what the next six months has in store.
“Over in the US attention will undoubtedly focus on the big tech players. Last week ended on something of a high for Wall Street but a couple of rough reports from those mega caps could send indices tumbling. Inflation, a strong dollar and consumers cutting back are likely to take a toll – the question is, how big a toll?”