Our expert Investment Management team at True Potential Investments give their views on markets throughout November 2023.

Investors have shifted from a mentality of “higher for longer” in respect of interest rates.

There is a belief that interest rates have peaked. The markets are now priced for five interest rate cuts into next year in both the US and the UK. Against this backdrop, both equities and bonds rallied, with the more interest rate sensitive sectors such as information technology faring particularly well.


United States.

The rate of inflation is reducing, with both base effects and slowing price pressures evident. Both cooling employment and decelerating wage growth play a big part in this.

Nominal GDP growth has slowed by one third in 2023 (from 8.7% to 6.4% by the end of Q3, ‘23), with fiscal stimulus and productivity growth supporting real growth above trend (+5.2% in Q3, 2023).

Looking forward, the Federal Reserve Bank of Atlanta GDP Nowcast for Q4 is now at 1.2%.

It may be reasonable to conclude that the July 2023 increase in Federal fund rates to 5.25-5.5% was the last of this cycle.

As far as the upcoming two quarters are concerned, US company earnings are expected to decline through Q4, ‘23 and Q1, ’24. However, the expected acceleration of earnings into Q2, ’24 seem elevated given existing monetary policy and employment growth trajectory.


Rest of the World.

The Bank of England and European Central Bank are indicating further policy rate increases are unlikely. Economic data demonstrates major pan-European economies are already in recession or seeing growth slow towards zero. The UK reported zero economic growth in the third quarter of ’23.

The stickiness of core inflation in the Eurozone (at 5% or above through Q4, ’22 > Q2, ’23) has rolled over. Core inflation has fallen by 1.1% in the last 2 months.

In the UK, meanwhile, it is as much a challenge for the Treasury as it is for the Bank of England. Gradual fiscal tightening is likely to be required, though may be politically unpopular. Nominal wage pressures are likely to subside very quickly through the second half of next year as ‘base effects’ from public sector pay awards fall out of annual measures.

There is little evidence of growth from China. Global interest rates and real yields are a factor in impeding progress for capital flows into the country. Domestically, a key challenge is the deterioration in real estate credit, both complex and challenging to resolve.



With sovereign bonds, our preference is US and UK Gilts given positive real yields (nominal yields adjusted for after inflation).

In equities, the US market holds a significant allocation within our models. This is supported by the region’s economic growth and our preference for the quality factor. We also see valuation support in European, UK, and Japanese equities.

With investing your capital is at risk. Investments can fluctuate in value, and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.

All stats sourced from Bloomberg.

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