Last week we wrote that stock markets faced being challenged by the decline of a number of stimulating aspects that had been regularly named as the drivers of the 2019 recovery. The most crucial one being central banks’ assurances that they would refrain from further monetary tightening and might even consider renewed rate cuts.
No wonder then that the past week began with weaker trending stock markets as everyone was waiting with bated breath for the latest policy announcements by the central banks of the US and UK. Better-than-expected European and US economic growth (GDP) rates had already raised the prospect that further monetary support might not be forthcoming. This was precisely what happened. Rate-setters at both the US Federal Reserve (Fed) as well as the Bank of England (BoE) ‘disappointed’ any remaining expectations of forthcoming rate cuts. Indeed, BoE’s Mark Carney went as far as suggesting capital markets were mistaken in only pricing in a single 0.25% rate hike for the next two years.
