At times like this when our national media go into a frenzy over something like the Conservative and Labour parties’ leaders’ debate from yesterday evening, events overseas can often be overlooked.
Commenting on the latest election news, Lindsay James, investment strategist at Quilter Investors said: “This week’s election results have been a stark reminder of the unpredictability of polls and market reactions. In India, exit polls at the weekend suggested Modi was on course to increase his majority, driving markets higher. However, the result was the opposite, with a coalition government now on the cards, prompting a steep drop in the Sensex. High valuations may mean that polling errors of this magnitude are taken as more of a bad surprise than a good one, but a coalition may temper the political extremes and provide economic stability – ultimately no bad thing.
“Investors are also digesting weaker signals from the US economy this week with employment data published yesterday showing job openings are now at the lowest level since February 2021. This leaves the ratio of openings to unemployed workers at 1.2 and effectively calls time on the labour shortages seen since the pandemic. While this should temper wage inflation, thus dampening the upward price pressure that has been evident in the service sector and has been one of the main drivers of ongoing inflation, if job openings continue to decline then the next step if often rising unemployment. This is currently low and so the snapshot of the current landscape is relatively benign, explaining why US equities have drifted sideways in recent weeks. While this may open the door to rate cuts in 2024, the difference now is that they are starting to look like they will soon be needed, which means it is more important than ever to see inflation coming down.”
