Inflation, interest rates and the UK mortgage market: what it means for investors, July 2023

JPMorgan global market strategist, Hugh Gimber, joins us today to give an insight into JPMorgan’s most recent Guide to the Markets report giving an overview on various economic factors influencing markets today. He provides insights into inflation, interest rates, the UK mortgage market, the US economy, and long-term return expectations for different regions.

We start in the UK discussing inflation and interest rates, highlighting that while headline inflation is improving, core inflation is still on the rise. Hugh acknowledges the stickiness of core inflation, which is driven by domestic factors such as wage growth and a tight labour market. Shifting to the UK mortgage market, Hugh explains why it has become less sensitive to interest rate increases as more households have transitioned from floating rate to fixed rate mortgages. However, the impact of interest rate tightening will gradually be felt as fixed rate mortgages expire and households reset onto higher rates.

Next we turn to the US market and the resilience of the US economy in the first half of the year, driven by consumer spending and a rebound in the services sector. However, Hugh still predicts a slowdown in the US economy and expresses caution about valuations in the US equity market. We finish with views of long-term return expectations, and we consider China, Europe and Japan as regions currently benefitting from attractive valuations relative to other regions.

To view the full Guide to Markets report from JPMorgan please visit their dedicated page