We thought it would be helpful to provide you with an update on the markets, given the falls over the past few days. The falls have not been triggered by bad news, but rather by positive data.
The US economy has been particularly strong this year, as President Trump’s fiscal stimulus has had a positive effect in addition to the already positive backdrop. However, this was not being reflected in US Government bond yields which were being held lower due to geopolitical events.
Recent US economic data has been persistently strong, leading to a sudden rise in yields and therefore borrowing costs. The markets usually take gradual increases in their stride, but a quick leap is not received well and has led to a repricing in the markets. Furthermore, there are now thoughts that the US Federal Reserve may increase interest rates more quickly due to the strong backdrop which would hamper growth.
We saw a similar event in February of this year and expect the markets to calm once the new potential outlook has been priced in. These falls may, therefore, present a buying opportunity.
We are watching events closely for you and will react if required.