Hello, and welcome to the latest Astute Market Overview. We’ll cover economic data from the US, UK and Japan, the magnificent 7, and the Spring Budget.

US economic picture

Let’s start with the US. In the latest US labor market data, 275,000 new non-farm payroll jobs were added, which is significantly more than the 200,000 that markets had forecast, a signal of a stronger than anticipated US labor market. However, data for both December and January was revised downwards, and the unemployment rate rose slightly to 3.9%.

This sentiment of a healthy economy is bolstered by the release of US CPI inflation, which, at 3.2%, revealed that inflation in the US is remaining stubborn at around 3%, higher than the 2% target.

Overall, this strong US economy might encourage the Federal Reserve to hold their key rates at the next meeting. We should note that these interest rates have a lagged effect on the economy, and so central banks won’t (or perhaps shouldn’t) wait for deep recessions, huge layoffs and stagnating prices before they cut interest rates.

UK jobs and growth

Turning to the UK, the economic picture is slightly different. UK employment data revealed that the employment rate decreased slightly at 75% over the period November to January, and redundancy increased markedly by 2.5 per thousand employees to 4.6 per thousand employees.

It’s key to note that these statistics from the Office for National Statistics come with a warning of accuracy due to response levels, not very useful to decision makers such as the Bank of England.

On a positive note, Gross Domestic Product (GDP) data released this week shows economic growth for January of 0.2% from the previous month, boosted by growth in the services sector, showing that the fleeting UK recession could be over already.

Japan

For the whole of this century, Japan’s economy has struggled with price and wage stagnation. However, the economy is beginning to shift.

Inflation in the region has maintained a rate of over the 2% target since the middle of 2022, and speculation is growing about whether the central bank will increase its interest rate from negative territory when they meet on 18th and 19th March. The central bank interest rate has been held at -0.1% for 8 years, and the last increase to interest rates was in 2007! However, we are yet to see a meaningful increase in wages in the region, which may be the final piece of the puzzle.

Whilst markets in Japan have been broadly flat since our last update, they have been creeping up this year.

Magnificent 7

We often get questions about the magnificent 7 – we touched on these 7 companies in our 6th February update. These are among the biggest companies in the US, and consequently, the

world. Since the magnificent 7 were crowned, the landscape has evolved, and if the dominating, strong performers were to be grouped today – in 2024 – then Tesla would be demoted; following a fall in the share price year to date, it’s no longer in the top 7 of the S&P 500. Nvidia, however, would lead the pack for 2024 growth.

Who are Nvidia? As a manufacturer of high-end graphics processing units (GPUs), Nvidia provide advanced chips to be used for AI training, and, according to their website, the “democratising the miracles of AI”. The company has consistently exceeded consensus expectations for earnings, which has supported the success in the share price to date.

Nvidia shares are up 90% so far this year. Last week, Nvidia shares fell by 10% at one point, fuelled by options trading (essentially investors taking a bet on the company’s share price). This volatility is a reminder to investors that the large price swings that can be seen are not only to the upside and highlighting the importance of owning a diversified portfolio of investments.

Spring Budget

And finally, Jeremy Hunt delivered the Spring Budget last week. From an investor perspective, we will be interested to hear the details emerge surrounding the UK ISA when the consultation period has finished. As mentioned in the Astute Private Wealth Astute Budget Overview, the FTSE 250 (a UK index of mid-sized companies) was up in the green by the end of the day, but there was no major market reaction to the budget. On that note, Astute Private Wealth have released a PDF of the Spring Budget today, which you can find on the Insights page of our website.

See you next time.