Stephanie Flanders: things are not going to plan

Faltering consumer confidence which raises the prospect of “a more significant economic slowdown in the second half of the year”, says JP Morgan’s Stephanie Flanders.

Dr Matthew Partridge
By
published
in Features

"Politics has not gone according to plan," notes Stephanie Flanders of JP Morgan Asset Management. "Expectations for Donald Trump's economic policies in the US are being revised down." But on the upside, the global economy has not produced any nasty surprises so far in 2017. Indeed, it's quite the opposite in terms of economic growth, "almost everywhere is picking up speed at the same time". Growth forecasts "for both the eurozone and emerging markets keep getting revised up" a big improvement on recent years.

The UK, unfortunately, is an exception. "Higher inflation due to the weaker pound is now biting into real wages, which are falling again after nearly three years of positive growth." Consumer confidence has also "faltered", which raises "the prospect of a more significant economic slowdown in the second half of the year". So far "UK household spending has held up", but that's partly due to consumers dipping into their savings. At least "corporate investment intentions have started to pick up".

The outlook for interest rates is also uncertain. "Inflation and wages are not rising as fast as expected on either side of the Atlantic," which could justify a slower pace of rate rises. However, "there is also, arguably, less need for monetary policy to remain so supportive". Already, several members of the Bank of England's Monetary Policy Committee have voted for higher rates, while various Fed policymakers have voiced "concerns about the level of US equity markets". What investors need to decide now is "which is more important for asset markets: monetary policy or the underlying state of the recovery?".

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Dr Matthew Partridge
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri

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