The noise
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The US Senate has passed legislation to end the drama surrounding the US debt ceiling. The measures put into place will suspend the debt ceiling and impose restrictions on government spending past the 2024 election. Despite concerns on aspects of the deal from various senators, many didn’t act on them to avoid the havoc that a default could bring on the global economy.
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May saw UK housing prices fall at the fastest annual rate in 14 years as per Nationwide. Prices in the year to May fell 3.4%, the largest decline since July 2009. Near term headwinds to the housing market are likely to remain strong, as the consensus view is that the Bank of England will need to raise interest rates further to combat inflation. This is supported by Bank of England data showing the amount of mortgage debt borrowed is near all time lows.
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European Central Bank (ECB) president Christine Lagarde was pleased to announce that rates hikes are starting to work at an event on Thursday. Despite this, the ECB committee has promised another rate hike in June. Rates in Europe have gone up by 3.75% in just under a year, the fastest pace ever, with ground still to cover to reign in inflation.
The numbers
The nuance
The House of Representatives passed the Fiscal Responsibility act this week, which subsequently passed in the Senate. This bill suspends the debt limit until 2025, in return for capped spending on most discretionary non-defensive government services. Beginning early next week, the Treasury will start to quickly replenish the reserves it has burned through this year. They will do so through an estimated $1.1 trillion net issuance of T-bills over the remainder of 2023. Empirical evidence suggests that such an action will have limited impact on valuations.
The introduction of ChatGPT, Bard, and other AI tools has made AI one of the key talking points of 2023. Despite fears that it will drive mass unemployment, it is currently one of the biggest creators of jobs. Across much of the financial services industry, around 40% of all open roles are for AI-related positions. Many firms, not just in financial services are working tirelessly to leverage AI to create value for shareholders. Over the coming months, analysing which are making productive gains will be key. It will likely be an important contributor to investment returns.
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