Walker Crips' Market Commentary

The Bank of England ("BoE") is expected to maintain a cautious approach to rate cuts in the coming months, with a Reuters survey showing a 10% chance of one happening this week. Investors also predict three rate reductions in 2025, totalling 0.75%, so a more measured path than the European Central Bank's ("ECB") anticipated 1.5%. However, the BoE faces challenges from sticky inflation and elevated neutral rate estimates, with policymakers signalling a lower bound near 3.5%. Meanwhile, UK economic indicators painted a mixed picture last week. GDP contracted by 0.1% in October, job vacancies sharply declined and insolvencies are rising amid cost pressures. Consumer confidence remains weak despite slight improvements. Public inflation expectations have also edged higher, complicating the BoE's policy outlook. With businesses cautious about growth and labour shortages hindering productivity, the UK economy could close 2024 in contraction, highlighting the fragile state of the recovery.Stocks featured:Currys, Raspberry Pi and SThreeTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

The UK economy is grappling with challenges as business confidence falters and retail sales dip. The Lloyds Bank business barometer fell to a five-month low of 41%, highlighting economic uncertainty, though firms remain optimistic about their trading prospects. Surveys from the Confederation of British Industry and the Institute of Directors indicate shrinking private sector activity and the lowest business confidence since April 2020. Elevated borrowing costs and higher employment taxes are straining businesses, dampening hiring and investment. Despite these difficulties, the Organisation for Economic Co-operation and Development (“OECD”) forecasts stronger growth by 2025, driven by public spending, though inflation is expected to stay above target.Stocks featured:Frasers Group, International Consolidated Airlines Group and Legal & General GroupTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

Last week, key economic updates highlighted mixed signals for the UK. Bank of England (“BoE”) Deputy Governor Clare Lombardelli expressed caution over wage growth trends, warning that a slowdown in wage disinflation might necessitate careful rate cut strategies. BoE official Swati Dhingra noted the UK is no longer an inflation outlier but stressed the difficulty of accurate inflation forecasting due to unreliable data. The Confederation of British Industry (“CBI”) painted a sombre picture, with surveys showing weakening sentiment in the retail and services sectors. Job cuts loom as firms grapple with tax hikes, while higher wages ahead of the holidays offer a short-term boost in hiring for sectors such as retail and hospitality. Consumer confidence waned slightly after the budget, reflecting concerns over economic stability. Despite reassurances about the financial system's resilience, the BoE’s financial stability report flagged heightened global risks, including geopolitical tensions and government debt vulnerabilities. This backdrop underscores challenges ahead for growth and inflation.Stocks featured:JD Sports, Kingfisher and Melrose IndustriesTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

Last week, the Bank of England (“BoE”) emphasised the labour market's critical role in shaping monetary policy. Policymakers stressed the importance of early 2024 labour market data amidst uncertainty of the budget's potential impacts on wages and employment. Inflation rose in October, with headline Consumer Price Index (“CPI”) at 2.3% and core inflation at 3.3%, driven by higher energy costs. Meanwhile, rental inflation rebounded, and retail sales slumped amid budget concerns. Flash Purchasing Managers’ Index (“PMI”) indicated the first contraction in output since 2023, as cost pressures and weak business optimism weighed. Consumer confidence dipped slightly in November, reflecting ongoing concerns about economic prospects despite resilient pay growth and employment levels.Stocks featured:CMC Markets, Games Workshop and Ithaca EnergyTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

Due to geopolitical uncertainties and a cautious market response to changes in fiscal policy, UK economic indicators were mixed. Growth slowed in the services sector, with the Purchasing Managers’ Index (“PMI”) hitting 52.0, reflecting hesitation from the Autumn Budget and geopolitical influences. Inflation data showed some improvement, especially in goods prices, providing a case for the Bank of England (“BoE”) to consider reducing policy restrictions. Meanwhile, the Monetary Policy Committee (“MPC”) voted towards a BoE rate cut to 4.75% to support confidence. The BoE downplayed the impact of an expansionary fiscal policy, but hinted that budget decisions might lengthen the rate cycle.Stocks featured:John Wood Group, TP ICAP Group and Wizz AirTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

The UK economy showed mixed signals last week, with key developments impacting market expectations. The budget delivered by Rachel Reeves, which included a £70 billion spending boost, led to predictions of a shallower rate-cutting cycle by the Bank of England (“BoE”). A Reuters poll indicated economists largely expect a cautious BoE approach, with rates potentially reaching 3.5% by the end of 2025. Job vacancies in London continued to lag, sitting 25% below pre-pandemic levels, partly due to the rise in hybrid work and lower demand for retail roles. Shop prices declined by 0.8% year-on-year, hinting that inflation could stay below the BoE's 2% target. Meanwhile, full-time pay rose 6.9% annually, with the strongest gains in hospitality and customer service roles. The UK manufacturing Purchasing Managers' Index (“PMI”) slipped to a contractionary 49.9, reflecting slower growth and stretched supply chains.Labour’s first budget in fourteen years focused on increasing public spending to address deficiencies in Britain’s public services, with measures like a £40 billion tax rise, mainly targeting businesses through increased employer national insurance contributions. Despite International Monetary Fund (“IMF”) backing for the Labour government's tax-based deficit reduction approach, the budget sparked market concerns, with gilts and sterling selling off. The Office for Budget Responsibility (“OBR”) projected little change in long-term growth, at around 1.5%. Moody’s also warned that frequent adjustments to the UK's fiscal rules could weaken policy credibility, highlighting limited fiscal buffers for future shocks. With state spending now at 44% of gross domestic product (“GDP”), Reeves faces pressure to balance economic stability and potential future tax hikes if growth remains stagnant...Stocks featured:Close Brothers Group, Kainos Group and Molten VenturesTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

The construction and infrastructure services company Morgan Sindall Group saw a share price rise of 14.91% last week following a strong trading update. The update highlighted better-than-anticipated performance, prompting analysts to increase earnings per share (“EPS”) forecasts for 2024 and 2025 by 7%. The company’s Fit Out division showed robust growth, with an order book worth £1.3 billion, up 15% from the end of 2023. Additionally, the Partnership Housing division is expected to deliver slightly higher profits. Analysts noted Morgan Sindall’s strong management track record and lower one-off costs compared to peers, emphasising the company’s good value proposition.Bloomsbury Publishing, publisher of books and reference databases, saw its shares jump 12.54% last week after the company reported stronger-than-expected trading performance for fiscal 2025. The publisher, known for the Harry Potter series, announced that profit attributable to owners rose to £16.6 million in the first half of fiscal 2025, up from £11.2 million a year earlier, with revenue increasing to £179.8 million from £136.7 million. EPS improved significantly, and the board proposed an increased interim dividend. Bloomsbury expects full-year results to exceed the market consensus of £319.3 million in revenue and £37.5 million in profit, boosting investor confidence...Stocks featured:Morgan Sindall Group, Bloomsbury Publishing and Close Brothers GroupTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.

Last week's UK economic data painted a mixed picture ahead of the Bank of England's (“BoE”) November policy meeting. Inflation has dropped below the 2% target for the first time since 2021, reaching 1.7%, driven by lower energy costs and eased supply chain pressures. Meanwhile, a notable minimum wage hike has underpinned pay growth for low-wage workers, despite broader wage growth moderation. As the labour market is easing, economists increasingly expect a BoE interest rate cut, with markets pricing in a 90% chance of two 0.25% reductions by year-end. Retail sales defied expectations, rising 0.3% in September, driven by strong demand in electronics. While the BoE previously signalled potential rate cuts contingent on inflation trends, the cooling data has solidified expectations of a dovish policy shift in the coming weeks.The upcoming 30th October UK budget is shaping up to be a pivotal moment, as Rachel Reeves navigates a challenging fiscal landscape with a £22 billion fiscal deficit. To address this deficit, proposals include raising employer national insurance contributions and increasing capital gains taxes on share sales, which could generate significant revenue. However, the proposals have faced pushback from business leaders and investors, with concerns over potential job losses and investment impacts being raised. The recent inflation decline below 2% has reinforced expectations for BoE rate cuts, potentially easing pressure on fiscal policy but also reducing tax revenue from inflation-related income. Meanwhile, the International Monetary Fund warned the UK of potential market backlash if debt stabilisation efforts fell short, adding urgency to Reeves’ fiscal plans...Stocks featured:Future, St. James's Place and XPS Pensions GroupTo find out more about the investment management services offered by Walker Crips, please visit our website:https://www.walkercrips.co.uk/This podcast is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this podcast constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN: 226344) and is a member of the London Stock Exchange.