This week

Gigi The Giraffe, Squishmallows and a fluffy guinea pig that happily gives birth to three baby guinea pigs, depending on what side of seven years old you are, could well make or break your Christmas this year, according to the Toy Retailers Association.

Announcing their 12 must have toys for Christmas 2022, the group also highlighted the inflationary pressures facing the UK consumer, with the average price of the dozen chosen playthings being just under £35, nearly £10 cheaper than two years ago. Interestingly studies show that consumers do still tend to prioritise spending on children for birthdays and Christmas, consistently spending upwards of £100 for children aged up to 10 years old.

From Barbie queues to Barbeques, it’s been a busy week on the inflationary front, with the most important economic data point this week coming in the form of Thursday’s US Consumer Price Index (CPI) reading. Rising less than expected for October, the annual reading of 7.7% is the lowest for 8 months, partially dragged down by falling food prices, in particular the cost of meat. It was soaring rental prices however, that accounted for more than half of the increase, with petrol prices also rebounding after three straight monthly declines.

The news that the US Federal Reserve may now be able to toy with the idea of dialling back its hefty rate rise trajectory sent markets into overdrive. It seemed investors weren’t playing around as the S&P 500 rocketed 5.5% and the tech heavy Nasdaq up 7.35%. Treasury yields rose sharply across the board along with sterling, which gained 2.65% on the greenback, making its way back to $1.17.

One man who was close to throwing all his toys out the pram this week was Donald Trump, as the Democratic Party fended off major Republican gains in the US midterms. The much touted "giant red wave" failed to materialise, with the Republicans appearing to fail to capitalise on incumbent President, Joe Biden’s, low approval ratings. However, exit poll data suggested voters may have punished Republicans for their efforts to restrict access to abortion.

The Republicans however, are closing in on the seats they need to take control of the House of Representatives and the Senate from the Democrats, meaning we could see years of political deadlock in the US going forward.

The end of the week saw attention switch to domestic shores as GDP data showed the economy shrank in the three months to September at the start of what could well be a lengthy recession. Although economic output shrank by 0.2% during the third quarter, the reading was less than the 0.5% contraction that had been forecast, allowing the more domestically focussed FTSE 250 to rise 1.6% in early trading.

It seems they were playing for keeps on the cryptocurrency market this week as Bitcoin fell below $16,000 (£14,049) for the first time since 2020. Investor confidence was hit by the news of the near-collapse of one of the world's biggest cryptocurrency exchanges, FTX. Concerns over the platform’s health triggered $6bn (£5.2bn) of panicked withdrawals in just three days. Rival exchange, Binance, who were due to rescue the ailing firm said reports of "mishandled customer funds and alleged US agency investigations" had swayed its decision not to buy FTX.

Bitcoin’s latest drawdown leaves the cryptocurrency down around 70% for the year in USD terms. Interestingly, a recent survey showed that 65% of Americans would want either cryptocurrencies or some sort financial instrument as a Christmas gift this year, with the recent losses incurred however, maybe a charming Squishaboo would be a better investment this year instead…

Next week

With a war of words emerging between the current Chancellor, Jeremy Hunt, and his brief Predecessor, Kwasi Kwarteng, over who’s fault the UK’s economic downturn is, the coming week could see an further escalation as the much anticipated November Budget, OBR projections and all, is released on Thursday.

We should get some idea about what those at the Bank of England (BoE) make of it all as Monday sees a number of Monetary Policy Report hearings at Westminster. During these sessions, the BOE Governor and several MPC members testify on inflation and the economic outlook before Parliament's Treasury Committee. The hearings are a few hours in length and can create market volatility for the duration, especially in currency markets as investors scrutinise any statements for hints as to future rate policy.

In what should be a heavily domestically focussed week, the Office for National Statistics releases its year on year UK inflation numbers on Wednesday. With CPI sitting at over 10.1%, economists and consumers alike will be hoping that price rises have now spiked, alleviating some pressure on the BoE to carry on with their aggressive rate hiking trajectory.

A lower inflationary reading would be a nice early Christmas present for Jeremey Hunt too, as he makes his debut with the dispatch box on Thursday. Announcing the government’s Autumn budget, the new Chancellor is preparing to make some “difficult decisions” to close the country’s £50 billion fiscal “black hole”. With the political uncertainty surrounding Westminster of late, we can be sure of a few things however. It has already been confirmed that Corporation Tax will rise to 25% from April 2023 and speculation has also been growing that a review of Capital Gains Tax may be on the Chancellor’s hit list too.

Whilst a more low key budget could be just the tonic to restore some confidence in the UK’s financial system, don’t crack open the champagne too early, unfortunately it has already been announced that alcohol duties will rise, in what could be a sobering experience for some consumers. 

 

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 11 November 2022.