He feels this is a consequence of the view that the persistently stronger economic news may mean interest rates are not cut with either the frequency or velocity that investors had priced in, which would have a materially negative impact on the performance of some asset classes — since, in his view, those asset classes are already pricing in rate cuts that may not happen.
This bout of optimism is also concerning Close Brothers Asset Management chief investment officer Robert Alster. His view is that while the tone of US central bank communication has altered in a way that indicates a positive outcome for risk assets, he is wary that the market may be pricing in too many rate cuts.
But he does note that some data in the UK points to a “modest recovery in confidence”, while in the eurozone he expects inflationary pressures to ease from here.
David Thorpe is investment editor at FT Adviser
