Recovery on Track ... Despite Market Wobbles ...

Finals weekend at Wimbledon and Wembley, a great couple of sporting days ahead. Is it really coming home on Sunday! Let's hope so. We wish the England team well, as they put an end to all those years of hurt!

Markets wobbled mid week. The ebb and flow of fortune on court, always evident in the markets. The Dow closed down below 34,200 on Thursday, before closing at a new record high at almost 35,000 by the end of the week.

American markets moved higher, European markets followed. Turmoil in the East, Asian stocks moved down. Beijing keen to pressure tech stocks with a US listing. The tech favorites like Alibaba, Baidu and Tencent moved lower, creating a new buying opportunity in the process.

The FTSE tested the 7,000 level before closing slightly down at 7,122. Markets were troubled by so-called slowing growth in the UK economy. The ONS released the GDP Monthly estimate for May. Growth increased by just 0.8% month on month, compared to 2% in April. Is the economy slowing? Not really.

Year on year, we expect growth of over 22% in the second quarter. The UK economy is on track to hit our central scenario of 7.5% growth this year and 5.5% next. The full slide deck with our scenario forecasts is available to view and down load to TSE Club Members and Premium Subscribers.

In the US, the Federal Reserve is reporting material shortages. Recruitment difficulties are slowing the pace of the recovery. Car output is hampered by the global chip shortage, supply side challenges in the housing market are pushing up prices.

As with all things, the market will resolve the anomalies. Fears of oil price hikes abound, yet world demand will not return to pre-pandemic levels until Q3 next year. OPEC failed to reach an agreement on output levels this week. Oil Prices moved lower at close.

Halifax reported house prices dipping for the first time since January. The annual rate of price growth was just 8.8% in June compared to 9.6% in May. For the second quarter, we model house price increases at 10%. We expect the rate of growth to slow to 6.5% by the end of the year.

The inflation story is abating. Ten year bond and gilts yields closed lower at 1.35 and 0.66. So what next for bond yields? It takes two sides to make a market. UBS Wealth Management said this week that it still expects yields to reach 2 per cent this year. BlackRock Investment Institute is shying away from government bonds on the basis that skinny yields offer little cushion to compensate.

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