Join our community of smart investors

Private Investor's Diary: Unilever is too cheap to ignore

John Rosier takes us through what he's changed in his portfolio in the past month
Private Investor's Diary: Unilever is too cheap to ignorePublished on July 17, 2023

The US Federal Reserve, encouraged by improving news on the inflation front, paused rate hikes at its June meeting. The Fed is expected to resume hiking rates again this summer. Despite falling headline inflation, the European Central Bank (ECB) increased rates by 0.25 basis points and warned of more to come. It believes that core inflation still needs reining in. However, the news was still bleak in the UK, with core inflation increasing and the headline rate falling more slowly than forecast. The Bank of England has brooked much criticism and responded by increasing rates by 0.5 basis points. Having got it wrong so far, it wants to avoid further compounding the error. Its mandate is to maintain inflation at around an annual rate of 2 per cent. The message seems to be, if that means forcing a recession, so be it.

In the US, short-dated Treasury yields rose (the two-year yield up to 4.13 per cent) while longer-dated yields fell (the 10-Year Treasury yield dropped to 3.8 per cent.) The higher yield on the short-dated paper suggests the market thinks that the Fed risks overdoing its tightening and that the risk of recession has increased further out.

Equity markets responded to the improving news on inflation. The Italian MIB led the way, gaining 8.2 per cent, with other major Continental European markets also making positive gains – the CAC 40 was up 4.2 per cent and the DAX 3.1 per cent. The Nikkei 225 hit a near-35-year high, gaining 7.4 per cent. As I write, it is only 20 per cent off its all-time high recorded in December 1989. In the US, the largest stocks continued to dominate.

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Already a subscriber? Sign in