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Positioning for a summer of wait and see

Cambridge’s investment team held its in-depth investment committee meeting last week, where we reflect on how the economy and capital markets have developed relative to our expectations from previous meetings and what may have changed that would justify a change of direction. As laid out last week we are currently holding a neutral position across portfolios. This is because the central banks’ indications to ease monetary policy once again have driven bond yields down and equity valuations up, but their stimulating effect has yet to filter through to actual activity level improvements across the global economy, and as a result corporate earnings growth has fallen behind the upward surge dynamic of stock markets.

Will US rate cuts lead to a weaker US dollar?

On Wednesday, the chair of the US central bank, Jerome Powell, appeared before Congress to give his testimony on the state of the US economy. In his speech the Federal Reserve Chairman cited a weakening global outlook, trade tensions and muted US inflation as risks to the US economy and gave a strong hint that the FOMC would soon cut US interest rates. Alas, the market had already priced in a 0.25% reduction in US interest rates for July, yet Mr Powell’s dovish speech still managed to push the S&P 500 higher and briefly above the 3000 mark for the first time, while also moving the US$ lower.

UK wind energy turns from niche to serious

We have spent some time in these newsletters discussing the autos sector as well as some of the challenges that incumbent firms face from the likes of Tesla, and the challenges faced by the challengers themselves. A common theme has been an increasing tilt towards at least partial electrification of the automobile market. The most recent news on this front has been the partnership between Ford and VW which will give both access to VW’s MEB electric car platform (to which VW have already committed €9bn), and Ford’s autonomous driving research.

 

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