With The Budget next week, forecasters are out in their droves surmising what goodies The Chancellor, Jeremy Hunt, will present. Will it be a reduction in National Insurance contributions or a cut to the main rate of income tax? The list is long.
His final decision needs to be good to provide the Government with any chance of remaining in power. Recent by-election results and YouGov polls underline the problem the Conservatives, and Rishi Sunak, have. With the latest inflation data not out until the following week, there is some key information missing. Jeremy Hunt should take note of food price inflation data which was out this week and neared a two-year low, driven by easing energy and fertiliser costs and fierce competition among retailers. This should lead to a better inflation reading. Recent news from China also points to their deflation being exported to the rest of the world and easing pressures for Hunt. If only the Office for Budget Responsibility could get a forecast close to accurate it might help instead of hinder!
The Chancellor needs to do something though. Overcaution has been his watchword to date. That needs to change.
Looking across the pond. We look certain to have another re-run of Trump Vs Biden for the US Presidency. Nikki Haley’s attempts to put up a fight looks futile with Trump’s convincing win in Michigan. With 15 states voting next week it could all be sewn up shortly.
Looking to markets, the UK market is still struggling to break out in 2024. The most excitement has been towards the US market with Nvidia and Bitcoin in the spotlight. Nvidia’s recent trading update was closely watched by all market participants. They certainly delivered with Q4 2023 revenue up 265% and Q1 revenue guidance up 300%. The AI boom looks to have further to go. Moving on to Bitcoin, it has risen fourfold in a 15-month period. Although not an investment medium we have countenanced, the euphoria may spread to the wider markets.
All in all, we do see 2024 being a good year for equity markets – it would be unusual for a US election year to be otherwise.
