Stocks soar, tensions rise: What past crises teach us about today's market highs
Welcome to the Finance Wrap-Up UK, where we navigate the choppy waters of markets and economic policy with the help of top experts on LinkedIn.
This week
Markets
The financial markets are facing contrasting realities.
Global stock markets are reaching unprecedented heights, initially propelled by excitement over artificial intelligence and now expanding beyond US technology sectors. However, this financial optimism stands in stark contrast to rising geopolitical tensions that threaten financial stability worldwide.
At a recent The London School of Economics and Political Science (LSE) conference, financial historians raised concerns about our readiness for future economic crises. They highlighted two critical issues: the fading memory of past financial disasters and shifting global power dynamics. As professionals who navigated the 2008 crisis retire, there's worry that crucial crisis management skills may be lost. Additionally, changes in the global political landscape could hinder the international cooperation needed during financial emergencies.
Michael Collins, a government affairs specialist, echoes these concerns on a broader scale. He notes that institutions often have short-lived memories, rapidly forgetting important lessons due to staff turnover and inadequate record-keeping. Collins suggests appointing official historians to preserve valuable insights from past experiences, both successes and failures.
Despite these warnings, some financial experts advise against panic. Grace Peters, global head of investment strategy at J.P. Morgan Private Bank, argues that geopolitical events rarely have lasting negative impacts on equity markets. She recommends investors stay engaged, focusing on areas where geopolitics and markets intersect, such as supply chain security, energy security, and cybersecurity.
This current environment presents a complex challenge for both investors and policymakers. They must balance historical lessons with current market optimism while navigating an increasingly uncertain global landscape.
The question remains: How can we capitalise on market opportunities while remaining prepared for potential crises?
Economy and central banks
The Bank of England maintained interest rates at 5.25%, the highest level for 16 years, last week.
This was despite UK inflation hitting its 2% target for the first time in three years. The decision came after a seven-to-two vote by the Monetary Policy Committee in which two members favoured a rate cut.
However, UK economy experts on LinkedIn say that the central bank's minutes of the meeting hint that a rate cut could be on the cards as early as August. The "cautious" decision leaves the Bank of England behind the European Central Bank and the Bank of Canada, which have already begun lowering rates while aligning more closely with the US Federal Reserve's stance.
领英推荐
UK economist Thomas Pugh explains why a rate cut was never really a possibility in June and how it feels unavoidable in August below:
Want to know how interest rate cuts impact you and your wallet? Watch my explainer here:
Industry News: UK Banking
Matt Hammerstein , who recently transitioned from Barclays UK CEO to head of Barclays Corporate Banking , took to LinkedIn following an investor meeting last week. He outlined key priorities for the corporate banking division and how they align with Barclays' broader three-year strategy.
Hammerstein's post offers insights into the bank's future direction and its plans to strengthen its position in the UK market. Read his priorities here:
Other LinkedIn Newsletters
UK and Europe Finance Editor: Manas Pratap Singh
Community Manager: Dani Markovits
Community and Editorial Segments Lead: Yessi Bello-Perez
Managing Editor: Emily Spaven
Statistician at U.S. Cellular
8 个月The primary factor underlying the market's strength is the emergence and rapid diffusion of a new technology, AI. Along with AI, there has been considerable progress in related technologies such as robotics and biotech. The emergence of computers and software lasting from the early 1980s to the late 1990s had a similar effect. By implication, the coming decade will be one of sustained growth. While the United States has been the main beneficiary of AI up to now, the United Kingdom's plan to establish itself as a center of science and research should enable it to achieve faster growth in coming years.
Founder and CEO at CarbonTRACC
9 个月Finance is almost always immune to non- finance crises; thanks to great and strong influence of Davos Man. Borrow to buy - all is well - we are immune.
Higher Level Human Behaviour Consultancy
9 个月This is what happens when you allow the speculation of markets to excel over the real fundamentals of a countries purpose for economic stability and for a financial system to properly support that economic stability. Although political economics improve through speculations growth and fresh numbers being plugged into their spreadsheets, it also brings with it increasing volatility and instability as speculative markets and chasing growth is actually bad for economic stability. The markets prosper but they drag the populations of States into their constant boom and bust.
International Consultant/ NED/ ESG cum Business English Trainer/ Founder/ Strategy Podcaster
9 个月According to Barclays, Taylor Swift's Eras Tour in the UK is projected to add approximately ￡1 billion to the UK's experience economy. And that has a possible influence on the BoE's rate cut decision. According to the Office for National Statistics, overall motor fuel prices rose by 2.3% in the year to May 2024, compared with a fall of 0.3% in the year to April. And the effect from transport services resulted from prices rising by more in May than a year ago. The prices of haircuts, hotels & restaurants are rising fast as well.
I Help Businesses Facing Rising Costs, Find Hidden Savings and Build Profitability | ￡11.8B+ Spend Under Management | ERA Consultant | Former MD, CFO, and Audit Chair | LinkedIn Top Voice
9 个月Interesting as always Manas - on the markets piece - will the excitement over AI last - how much competitive advantage is it driving outside of AI companies? Will the bubble burst or will AI be a too just like how spreadsheets changed the face of finance for ever!