Inflation in the threes 

Inflation fell to 3.4% in March (published 20th March), down from 4% in the previous month.1 This isn’t a world away from the Bank of England’s target of 2%. The day after this latest inflation figure was announced, the Monetary Policy Committee voted to keep the base rate steady at 5.25%. 

Further falls in inflation are expected over the next few months as reductions in the energy price cap are factored into the Consumer Price Index (CPI) calculation. For now, all eyes move to June – when many expect the Bank of England to cut rates.

Plus, while the UK economy was in recession for the last six months of 2023 – the economic growth figure for January was positive (up 0.2%).2 We won’t know whether the UK is out of recession until late April or early May when the full Q1 economic figures are released – but the signs are positive.

 

Consumer confidence rises

To make matters better, consumer confidence is rising as reported by research company GfK. Figures show that people’s outlook on their own financial situation for the year ahead – a sub-index of its overall consumer confidence index – increased by two points month on month in March 2024.3

This prompted the Bank of England to describe the consumer confidence index as ‘broadly stable’. Stability here is not an indication of stagnation – it’s a good sign.3

 

FTSE 100 posts gains 

The FTSE 100 was up 3.69% in March – its best show in several months.4 The rise was led by miners and oil companies, with both benefiting from higher commodity prices. 

The price of gold increased by 6.35% in the last 30 days (retrieved 2nd April), and silver was up by 4.74% in the same timeframe.5 In a similar vein, the price of Brent Crude (a key market benchmark for the price of oil), was up 4.6% in the last 30 days (retrieved 2nd April).6

 

S&P 500 follows suit

Across the pond and the Americans struggled to keep up – but the S&P 500 still finished the month 2.08% up from where it started.7 This is a slowdown from recent months for the index, but it’s not a bad sign. As in the UK, commentators in America expect that their central bank – the Federal Reserve – will cut rates in June. 

Any interest rate cuts are usually positive news for markets, as people pump more money into stocks and similar investments to chase higher gains that they can no longer earn in savings accounts. 

It’s not an indication of things to come, but we haven’t seen a pullback in the US market in some time. Consistent highs and constant growth aren’t a bad thing, but they can make investors think ‘how long will this last’. In a way, this can become a self-fulfilling prophecy – the more apprehension there is about a thing happening, the more likely it is that the thing will happen. People can start to get nervous, start to sell, start to think that ‘this’ is the top and the market can’t go any higher. Selling begins, and the market begins to fall. 

That’s not to say that this will happen in the US, but it’s a note to say that consistent highs and unchecked growth can be an oddity. Keep your eyes on the Fed’s decision in June. And remember, if we  do see a pullback in the US market it’s a perfectly normal part of the market cycle – the best thing to do is stick to your plan; the money you’re investing will go further.

 

All investing should be long term (min. 5 years). The value of your investments can go up and down, and you may get back less than you invest.

 

1 ONS, March 2024

2 BBC, March 2024

3 Financial Times, UK consumers confidence in their personal finances highest since 2021,  March 2024

4 Google Finance, 1st March to 2nd April 2024

5 goldprice.org, March 2024

6 marketsinsider.com, March 2024

7 Google Finance, 1st March to 1st April 2024