Jane expects interest rates to rise more slowly and reach equilibrium at a lower level than many in the market expect, because declines in commodity and import costs offset overall inflation and rising wage growth.
“Recent data is also quite supportive of our long term themes of a changing energy economy and emerging manufacturing technologies,” he said, adding: “Much of the fall in the oil price reflect the desire of the owners of large oil reserves to sell their oil as demand growth slows.”
“At the same time, weakening demand for commodities and slowing Chinese exports could also be an indicator of the changing nature of manufacturing and consumer demand. The results season has shown that a greater proportion of consumption is going online and in services, rather than in products manufactured in large scale factories in emerging markets. This trend is expected to continue. Weakness in capital goods demand has been a recent feature probably reflecting the same trend,” he said.
For Richard Stammers, investment strategist at European Wealth, the current market is equally vexing.
“There has been an enormous amount of noise in recent weeks, but no resolution. We pride ourselves on being high conviction investors, but at the moment, there is very little to really be convinced about.”
Rosie Bullard, portfolio manager at James Hambro & Partners is of the view that with stability and certainty in short supply, caution is warranted across all risk markets.
While she says the firm sees increasing downside risk in the bond market, it does still see value in equities, although here too caution is required.
“Growth is getting harder to find and markets are more expensive, so it is even more important for us to ensure that companies are meeting analysts’ expectations and justifying their valuations,” Bullard said.
“We expect volatility to remain during August as the flow of economic news slows down and volumes are smaller. Under these conditions, movements can be exacerbated and, of course, there remains the potential for Greece or China to further spook the markets.”
The other major question that has loomed over markets in July is the timing of the first rate hike in the US. Here too no clarity was forthcoming and, judging by the wage data out on Friday afternoon, none should be expected in August.
Indeed, if there is anything to take away from what has been a rather brutal July in many ways, it is that in many others it wasn’t brutal at all. It is a market intent on playing with investor emotion and those emotions are likely to ratchet up as August unfolds.
