10 January 2024
If you are covering the latest stock market and financial news, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“Stock markets are digesting the first round of Christmas sales being reported, with the likes of Sainsbury and Greggs having strong festive periods. While only a very small snapshot, it indicates that the worst of the cost of living crisis may be behind us and the UK consumer is holding up okay despite the economic challenges we face.
“However, recent data from the British Retail Consortium suggests 2024 won’t see the recovery play out just yet as consumer spending habits have without a doubt changed since the pandemic. If you dig into the data too, it appears consumers are more prepared to spend on quality or more likely to make big experiences rather than spend on consumer goods on the high street, so it is going to be an uncertain year ahead for retailers even with a continued moderation of inflation.
“Meanwhile, with the fourth quarter seeing small cap stocks rally as markets began to price in ever larger rate cuts for 2024, the US NIFB Small Business report highlighted that small business owners are far less optimistic for the year ahead than the market has implied. However, the NIFB Small Business Optimism Index increased 1.3 points in December to 91.9, marking a turning point in the data, having for two years come in below the 50 year average of 98. Inflation replaced labour quality as the top concern of business owners, although 40% of business owners reported job openings they could not fill in the current period, primarily in the construction and transportation sectors, providing continued evidence that there is a skills gap in the US economy. With 1.4 jobs still available per unemployed person, it seems many of these potential candidates either don’t have the skills required for the work available, can’t afford or find the childcare that would allow them to work, or have chosen to live off government benefits as long as they can. The commentary in the NFIB Report is fascinating – the author is keen to highlight that small business optimism surged under President Trump, whilst describing the current administration as “spewing out new regulations and looking for ways to spend more on favoured projects” and must be taken to be somewhat representative of how small business owners in the US view the current state of affairs in US politics.
“Staying with the US, tomorrow brings the latest set of CPI data. Headline CPI is anticipated to increase 0.2% month on month in December, up from 0.1% in November, pushing the annual rate up to 3.2% from 3.1% and highlighting that the Q4 gains from sharply lower energy prices are now largely in the rear view mirror. If it comes in line with expectations, this may fuel expectations that May is becoming more likely than March for the timing of the first rate cut.”
