The Evelyn Partners Investment Podcast: is there room for tentative optimism?

In August’s episode of the Evelyn Partners Investment Podcast Cherry Reynard and Ben Seager-Scott discuss whether better news on inflation, economic growth and corporate earnings is cause for celebration or caution?. The S&P 500 index is in line for its best run in decades, but should this give investors pause for thought as valuations expand?

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The US S&P 500 index has seen its longest winning streak in over a century in spite of persistent concerns over the strength of economic growth. It has been encouraged by better data on inflation, growth and corporate earnings, helping it to shake off interest rate rises from the Federal Reserve and European Central Bank.

However, all this good news may leave stock markets vulnerable to disappointment. The impact of rising rates has still to be felt in its entirety, while inflation continues to dent household spending. Companies have been successful at raising prices, but this may not endure as growth weakens and valuations leave less margin for error.

Strains are also being seen in the fixed income market, where credit spreads have narrowed over the past 12 months. Absolute yields are still high, but there is less value than there has been. Ben Seager- Scott suggests it is an environment where selectivity will be crucial.