Emma Wall, Chief Investment Strategist, Hargreaves Lansdown: “Happy Fed Day global markets – after much speculation and market-moving narrative, today the Federal Reserve Open Market Committee is expected to cut interest rates by 25bps. This cut is fully baked into markets, and any deviation will cause considerable upset. Global markets had a mixed session yesterday awaiting the news, with the S&P 500 falling slightly and NASDAQ up marginally. Futures look more positive across the Pond, with both indices looking to open up later today. Asian markets have had a negative session, while the FTSE 100 has opened up this morning in London.
With a quarter cut almost a certainty, what will be more revealing than the Fed decision itself is the press conference following the meeting in which Chair Jerome Powell will give some forward guidance on the potential for further cuts looking ahead to 2026. Expect the markets to respond to any positive – or indeed negative – sentiment. Eagle eyes will be on the voting split too, and any comments from individual members in the coming weeks. This remains a jumpy market, with valuation concerns and weakening economic data, rhetoric matters.
It has been jobs and inflation data that has underpinned Fed decisions thus far, with Chair Powell remaining steadfast in his intentions to be tied to facts – rather than cave to political pressure. While Powell remains in charge, expect this focus to remain. Investors may therefore take note of the Bank of America Institute Employment Report that came out overnight. It shows a mixed picture, with month-on-month salary inflation slowing, but Americans on unemployment benefits sticky at 10%.
Looking under the hood, the household disparity shows that higher income earners experienced 4% annual wage inflation, but lower earnings just 1.4%. While this has the potential to cause an economic impact it is a marked improvement from earlier in the year, where lower income households saw wage deceleration. US GDP growth is heavily dependent on consumer spending, so any cost-of-living crisis would quickly flow through to economic data – curbing inflation, but stagnating expansion.
Closer to home, data from NielsenIQ reveals Brits are due to spend £20 billion on groceries this Christmas – but affordability reigns. Next week is peak spending season, with £5.7 billion expected to be spent from Monday to Sunday. This will be welcome news to the UK’s food retailers – though perhaps not the big three of Sainsburys, Tesco and Asda as the report reveals online supermarket Ocado is growing at the fastest rate, followed by Lidl and Marks & Spencer.
Black Friday data from Deloitte and a National Retail Federation survey last month revealed that while footfall was high amongst US consumers during the sales season, spending was down – and the NielsenIQ report echoes some of this penny-pinching vibe, with expectations that UK consumers will be focused on deals, savings, loyalty points and promotions. Overall sales on promotions increased to 25%, a sign that while the worst of the cost-of-living crisis is behind us, persistent inflation has made British households understandably cost conscious.”
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