Originally published at: This week in charts: The Maleficent 7 – InvestEngine Insights
Thankfully, this week was calmer than last.
Our most recent weekly chart post was all about the selloff in US equities, which reached correction territory last week (any loss greater than 10%). Leading the selloff has been the big technology stocks – aka the ‘Magnificent 7’, which are now down over 20% (and are being tentatively renamed the ‘Maleficent 7’):
Source: Bloomberg. Performance is for the Bloomberg ‘Magnificent 7’ index in GBP. Past performance is not indicative of future results.
This week provided some respite for investors, with some mid-week relief coming from Jerome Powell’s comments at the Federal Reserve’s March meeting.
Central banks more generally took centre stage this week, with three major banks all meeting to decide the direction of interest rates. The Bank of England, Federal Reserve, and Bank of Japan all met to grapple with the complex interplay of slowing growth, persistent inflation, and geopolitical trade tensions.
In the US, the Fed kept interest rates unchanged. It lowered its growth forecast to 1.7% and raised its inflation outlook, pointing to ongoing uncertainty from the tariff policies introduced during President Trump’s term, which have increased fears of stagflation (that tricky combination of slow growth and high inflation).
Over in Japan, the Bank of Japan also held rates steady at 0.5%. They’re especially concerned about the impact of global trade disputes and US tariffs, given how much Japan relies on exports. Even though wages are rising at home, high prices — especially for food — are eating into household budgets, making it harder for Japan to move away from its ultra-loose monetary policy.
Source: Bloomberg.
The Bank of England followed suit, keeping rates at 4.5%. With the UK economy barely growing and wage pressures staying strong, the BoE is signaling caution. Inflation is expected to tick back up, so any future rate cuts are likely to be gradual. The market-implied path for interest rates changed only a little post the BoE’s meeting, with the market still expecting rates to fall to around 4% by the end of the year:
Source: Bloomberg.
All three central banks are treading carefully in a climate of heightened uncertainty, balancing the need to support growth with the mandate to control inflation.
For those keeping score this year, the selloff has kept the US underwater, down 7% this year. Emerging markets, the UK, and Europe are all in positive territory and handily outperforming the US – demonstrating the benefit of a globally diversified portfolio:
Source: Bloomberg. All returns in GBP. Past performance is not indicative of future results.
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