Columbia Threadneedle – a macroeconomic update

At Kellands we are committed to training and professional development and often invite thought leaders and industry experts to share their knowledge with the team.

In our latest team meeting we were delighted to be joined by Steven Bell, Global Macro and Chief Economist, Managing Director at Columbia Threadneedle. Steven is an expert in his field having spent 20 years at Deutsche Bank as Global Chief Economist and prior to this as an Economic Adviser at the UK Treasury. Suffice to say the team couldn’t wait to hear Steven’s macroeconomic update! Kelland’s Chartered Financial Planner Charlotte Knight reports on the key points.

What did Steven’s update focus on?

Steven focussed on the impending recessions facing the US, Europe and the UK. Interestingly he talked about how the US is in need of a recession – which isn’t necessarily a bad thing. If the US goes into recession, he felt it is likely to be short lived and will help bring the US economy under control. He explained that US car prices are beginning to decline as the demand has started to subside meaning price pressures are easing for manufacturing. The rents & house prices in America began to increase exponentially – as they did in the UK – and it is believed this will begin to tail off back to normal in 2023. Wage inflation in the US is still high, due to low unemployment, which has a knock-on effect. When unemployment is low, it means it is a candidate’s market – forcing companies to increase the salaries offered which isn’t affordable in the long-term.

What did he feel a recession means for the UK?

Of course, we also discussed the UK economy and how inflation climbed again in October to 11.1%. Steven explained that a UK recession would help to lower inflation over time, hopefully bringing it down by 2024 and crucially he believes that the UK recession could be quite shallow meaning interest rates can return to what we may consider ‘normal’.

UK real income is currently down by around 7% but sterling is becoming stronger and he therefore suggests that 2023 may bring more positives towards the end of the year and leading into 2024. Given that people were unable to spend during Covid, it seems that although real income is down and prices are rising, the surplus savings from 2020 are supporting spending.

We discussed thought provoking statistics on employment. There has been a notable shift as people on benefits register on sickness benefits instead. It is anticipated that there will be a change in the economy as the students of 2020/2021 begin to take up work and some people return to work from long term sick leave.

What was Steven’s take on the current energy crisis?

As the majority of Europe tries to becomes less reliant on Russia, he discussed how gas prices will begin to ease which will help to bring inflation across the board. It provides a glimpse of how things may start to move forward for all.

Steven explained how energy bills have been heavily reported on as they have been rising across Europe and countries are taking different approaches to try to help dampen the effect on the public. We learnt how the UK have announced a price cap as the expected bills were forecasted to hit £4,500 – this is now capped at £3,000. France’s energy supplier is nationalised, it was therefore easier for France to control the annual household bill, keeping it below £2,000 (the equivalent of). Germany have allocated billions to combat the price rises to bring the annual bill down to £2,000 for 2023.

How do updates like this help you professionally?

Updates like this help to give us a better understanding of what economists’ views are and how current affairs affect how they manage the funds we invest in. In turn meaning we can have more in depth conversations with clients to advise how portfolios are being positioned to deal with the ever-changing environment. This is crucial to ensure we protect and grow portfolios for our clients.

We are inundated with charts and figures daily, often without much explanation. These updates enhance our knowledge giving us the opportunity to educate ourselves and of course, our clients. On a personal note, I have recently received Chartered status and updates like this are valuable to compliment my studies and help with my ongoing professional development.

When the term recession is consistently hitting headlines in the media it can begin to cause concern and worry – this particular update has helped us to understand that once we are officially in a recession, it may be short lived and may help to bring inflation under control, providing light at the end of what has seemed to be a very long tunnel! It will be a few more months of pain before we see an upturn, meaning it may be a great opportunity for people to start investing. Overall it was encouraging to hear a positive take on the current financial markets.

By Charlotte Knight, Chartered Financial Planner

 

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