Inflation at its lowest level in almost three years
It’s big news – UK inflation is in the 2s. The latest release, which puts CPI inflation at 2.3%, is just 0.3% away from the Bank of England’s target and down from 3.2% the month before.1
It’s now looking like a choice between 20 June or 1 August for an interest rate cut that many have been anticipating for the last few months. Markets currently favour August.
UK emerges from recession
The UK emerged from recession following 0.6% growth in the first three months of 2024. The recession was shallow – lasting for the final six months of 2023 – but it’s still good to see that growth is the word of the day and the economy is expanding.
UK election called for 4 July
On 22 May, Rishi Sunak announced he was dissolving Parliament and calling a general election for 4 July. The good news is that investment markets in the UK don’t really care about politics.
Politics is reasonably stable in the UK, and markets more or less ignore the day-to-day. When things get extreme – like with Brexit or Liz Truss’s mini budget – markets do react; but those instances have been few and far between over the last 100 years.
So while the next 6 weeks will be very noisy and you’ll hear a lot of political speak, the impact on investment markets will likely be negligible.
Apple announces share buyback
Across the pond, Apple announced a $110bn ‘share buyback’ programme. It’s the largest in history – but what is a share buyback programme?
Well – it’s what the name suggests. A company buys back some of its shares from investors. It essentially goes to the market and buys up its own shares. For anyone who wants to sell their Apple shares, the Apple company may be on the other side of the trade, buying the shares from you.
This has a couple of impacts. First of all you have a known ‘mega buyer’ of shares in the market, so this demand drives up the share price. Secondly, over time it reduces the number of Apple shares in general supply, which again drives up the price.
Once Apple owns the shares, they can either hold on to them or cancel them, the latter permanently reducing the number of Apple shares in circulation. Every Apple share that is still in circulation then owns a bit more of Apple than it did before and therefore becomes more valuable.
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, 22 May 2024
