US inflation: good news but not good enough

Elsewhere, we’ve seen weak economic data out of China where the woes of the property sector and residual covid problems are weighing on the economy.   Back in Europe, the cost-of-living crisis continues to worry everyone, and governments are tackling the problem in a variety of ways.

In the UK we have the distraction of a Tory leadership contest that will also select the next Prime Minister. The leader of the opposition has returned from holiday to announce a plan to cancel the next hike in energy prices for consumers and raise the money by taxing energy companies. The added benefit is that inflation would fall, saving the government billions of payments on indexed linked gilts. Apparently 7 out of 10 Tory voters approve of the plan, yet party members look set to elect Liz Truss who opposes further windfall taxes and has announced no specific plans to help consumers.

All in all, rising interest rates and the prospect of recession are a worrying backdrop for risk assets like equities. I’m pleasantly surprised by the strength of equities of late, but I feel that it’s temporary and that equites are set for tough times in the months ahead.