Worldwide Financial Planning

Equities have done well so far this year, but bonds have struggled due to the tension between central banks and markets’ assumptions about rate cuts. Investors have been forced to readjust as inflation remained sticky and central banks appeared reluctant to move too early.

You only need to look at the wildness of its price to see that no-one knows the answer to that – other than the market makers creating it probably. There can clearly be no efficient pricing structure.

An end to the interest rate hiking cycle would be welcomed by US consumers, who have seen new US mortgage rates spend four weeks above 7% for just the third time this century. Despite this, new home loan applications increased by 2.3% in the week ending August 25.

While the market is easily fooled by headlines so too, unfortunately, are central banks. The true state of the economy won’t be clear for months so policy makers have to make do with the data they have, while the impact of today’s decisions won’t be apparent for another year.

The outlook hasn't really altered but investors are expecting both inflation and interest rates to remain higher for longer.

So start with learning from the past. Why didn’t other resolutions work and why did some actually succeed.