Good morning,


The European Central Bank (ECB) kept rates unchanged last week, as expected by the wider market. A similar outcome is also forecast when the Federal Reserve meets this week. An important distinction within the ‘higher for longer’ narrative is that this doesn’t mean rates will go higher, more so that they won’t move lower as quickly as was previously envisaged. In terms of smaller central bank moves, it has been noted that the impact on the Russian economy post the invasion of Ukraine hasn’t been as severe as expected. This may be true, but as the ECB kept rates unchanged at a record high of 4%, the main Central Bank of Russia interest rate now stands at 15%.


Whilst the macro narrative continues to dominate, it is worth noting that many of the world’s largest companies have reported Q3 earnings in recent weeks. We noted in our July Investment Outlook that investors will remain ‘intolerant of earnings’ disappointments.’ The latest earnings insight from Factset sees this borne out in the data, with companies that have seen negative surprises for Q3 earnings down an aggregate -5.2%, versus a five year average of -2.3%. A tighter rate environment leads to a more selective allocation of capital – and a more punitive response from investors for those who do not deliver.


As always, if you wish to discuss anything in further detail, please do get in touch.