The British Brief

Following Jerome Powell's speech at Jackson Hole, the S&P 500 rose 0.9%, as shown by the figure from the Financial Times below, and the Nasdaq rose 1.2% closing on an all-time high. The question then, is what did Jerome Powell say that made the markets react positively, continuing their climb to higher and higher highs. I am sorry to disappoint, but as boring as it may sound, there were no real fireworks to report from the Jackson Hole speech. However, Powell has given us an insight into the actions the Fed is likely to take over the coming months and years, giving the market some certainty about the future. We now know that the Fed has achieved the first of its two goals that it has set out to achieve before monetary tightening. The goal that has been achieved being average 2% inflation and the goal not yet achieved being the economy operating at full employment, though he indicated that there has been good progress in reaching full employment due to falling unemployment.   Al

Robinhood is an extremely popular brokerage app and the most popular platform for US retail investors. However, the company has put its European launch on hold, leaving a gap in the market for a low-cost trading platform to take hold of European retail investors.     Like the USA, retail trading is becoming increasingly popular in Europe due to zero-commission trading. The start-ups vying for dominance in the European market are Trade Republic in Germany, Freetrade in the UK, and Bux in the Netherlands. These start-ups have recently seen their active user base rapidly increase to between 400,000 and 600,000 and are now expanding throughout Europe to gain market dominance.    Brokerage apps are restructuring trading altogether, undercutting the high commissions European banks charge. Low-cost market access to thousands of shares, funds and cryptocurrencies is attracting millions of customers to these apps. However, regulatory scrutiny is growing in Europe after Robinhood faced US lawmak

As shown by the graph below, last week the US consumer price index (CPI) jumped to the highest level since the 2008 Financial Crisis, reaching 5.4% Year-on-Year (Y/Y), compared to the expected 4.9%. The Core reading showed the largest Y/Y increase since November 1991, coming out at 4.5% compared to the expected 4.0%. Due to the current circumstances, this rapid increase in inflation would not normally warrant the need to worry, as this is bound to happen due to a year of pent-up demand. However, there is worry, especially among leading economists such as Lawrence Summers, that the Fed has been extremely excessive in their  support and that, without monetary tightening, we may soon be heading to an overheating of the economy.  As of now though, the insistence by the Fed that this high inflation is only transitory seems to be supported. Looking below at data from the US Bureau of Labour Statistics, we see that the main factors driving up inflation are energy prices and used cars (highlig

According to the Financial Times, the likelihood of rate hikes before the end of 2023 is now very high among economists. In a joint survey with the University of Chicago, 52 economists were polled on their views on whether they believed interest rates would be 50 basis points higher by the end of 2023, the results are shown below, in the form of a dot-plot, as used by the Fed. The results are  striking and closely resemble the sentiment of the Federal Open Markets Committee (FOMC) in the recent dot-plot published by the Fed after the June policy meeting, which is shown below. The views of the FOMC and that of academic economists being closely aligned means a scenario where interest rates are at least 50 basis points higher by the end of 2023 is now very likely to happen as a hawkish view is starting to take hold among both economists and the FOMC alike.  What will be the driving factor for rate hikes by the Fed?  In my opinion, the Fed is worried about the recent rising inflation, reac