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Telegraph
18 hours ago
- Business
- Telegraph
Rachel Reeves and the Bank of England cannot change the long course of history
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. The economy's near-term outlook remains highly uncertain. Although GDP growth surged to 0.7pc in the first quarter, which was up from an expansion of 0.1pc in the prior period, recent interest rate cuts are likely to take many months to have their full impact on the economy due to the existence of time lags. When combined with the potential for sticky inflation over the coming months, as well as the possible ill effects of higher costs for businesses caused by changes to employer National Insurance contributions, investors may naturally seek to avoid UK-focused stocks. However, in Questor's view, the long-term return prospects for UK-listed companies are highly appealing. Crucially, an uncertain near-term economic outlook means they trade on low valuations which in many cases are significantly below their intrinsic value. This provides scope for significant capital gains, both from upward re-ratings as investor sentiment gradually improves, and as a result of a faster pace of earnings growth as the full impact of monetary policy easing becomes apparent. Indeed, history shows that GDP growth and the stock market's performance are cyclical. Even though various chancellors and investors have previously claimed otherwise, often during periods of economic expansion and bull markets, the economy and equity markets are inherently boom-and-bust entities that simply refuse to go in one particular direction ad infinitum. Just as interest rate rises between 2021 and 2023 led to a stifling of economic activity, and acted as a drag on company profits, thereby prompting relatively downbeat stock market performance, the current period of sustained monetary policy easing is highly likely to do the opposite. Investors who are able to look beyond short-term economic uncertainty to a period of relatively fast-paced growth and buy shares that are grossly undervalued, are therefore likely to generate high returns over the long run. Of course, stocks purchased amid the current challenging economic climate must be able to ride out short-term difficulties in order to produce high capital returns in the long run. Companies with solid financial positions are well placed to do so, with modest levels of debt as a proportion of net assets and generous headroom when making interest payments from operating profits likely to be key considerations for investors. Sound finances also provide scope for a business to reinvest in its operations in order to strengthen its market position for the long run. A solid balance sheet may further allow it to make acquisitions that bolster its financial prospects as the economy's performance gradually improves. Companies that benefit from having a competitive advantage may also be in a relatively strong position to overcome prospective near-term economic difficulties. A solid competitive position may, for instance, be derived from having a significant amount of brand loyalty that means customers are more likely to reduce spending elsewhere before cutting back on their consumption of a specific company's products. Lower costs vis-à-vis rival firms also equates to a competitive advantage. It allows for price cuts that enhance the appeal of a company's products amid a challenging financial period for consumers. A strong competitive position further bodes well for a firm's long-term financial and share price performance. For example, it may enable a company to build its market share during an economic downturn, thereby allowing it to occupy a stronger position through which to capitalise on rising demand as the rate of GDP growth improves. Clearly, it is impossible to state exactly when the economy and stock market will deliver consistently strong performance. Indeed, it may only become clear after the event, when multiple quarters of strong GDP growth and attractive share price gains have already been posted. Therefore, it may be logical for long-term investors to seek to move ahead of the curve in terms of buying shares in high-quality companies at attractive prices while their peers continue to do the opposite. While this may entail paper losses in the short run, a willingness to go against the investment herd has proved to be a highly worthwhile approach in the past. In Questor's view, it is likely to remain so over the coming years.
Khaleej Times
a day ago
- Business
- Khaleej Times
UAE's real GDP expected to expand at 4.8% this year
The UAE's real GDP growth is expected to grow at 4.8 per cent this year, following a 4.0 per cent expansion in 2024, driven by a pick-up in activity in the hydrocarbons sector, a leading financial institution said. According to a note from Emirates NBD Research, the growth in the hydrocarbons sector is based on adjusted baseline targets and a change of strategy from Opec+, which recently raised production quotas for its members. Oil sector growth is projected at 5.0 per cent, up from just short of 1.0 per cent last year. Emirates NBD anticipates a modest slowdown in non-oil growth to a still robust 4.7 per cent, from 5.0 per cent in 2024, with Abu Dhabi likely growing at a faster pace than Dubai once again. 'Transport and storage, construction, and financial services are likely to remain key growth drivers across the emirates. In 2026 we forecast GDP growth of 4.6 per cent,' Daniel Richards, Senior Economist at Emirates NBD, said. The UAE's current account surplus is expected equivalent to 8.1 per cent of GDP, down from 9.1 per cent last year. 'The modest fall is on the back of lower oil prices which we forecast at an average $68 per barrel in 2025, from $80 in 2024. As a result, we expect a pick-up in the current account balance to 9.0 per cent of GDP in 2026 as both oil production and global oil prices are likely to be higher,' Richards said. The UAE's fiscal surplus is expected to decline to 1.8 per cent of GDP in the UAE this year, down from 3.4 per cent in 2024, as lower oil prices constrain revenue. This will be the fifth straight year of surplus: since 2017 there has only been a deficit in 2020, in the midst of the Covid-19 pandemic. In Dubai, the government committed to an expansionary budget of Dh86.3 billion in 2025, marking a nine per cent expansion on the Dh79.1 bilion that was allocated for 2024, with the government projecting a surplus equivalent to 4 per cent of GDP. Dubai's monthly CPI inflation is expected to average around 2.5 per cent year on year this year, which would mark the slowest pace of price growth since 2021. 'Annual inflation over the first five months of the year has averaged 2.8 per cent, moderately higher than our full-year forecast. However, most components of the basket continue to show only moderate price growth and we anticipate that inflation should be maintained around current levels through the rest of the year, a slowdown from the 3.2 per cent pace seen at the start of 2025,' Richards said.
Entrepreneur
a day ago
- Business
- Entrepreneur
India's GDP Grows 7.4% in Q4 FY25; FY26 Forecasts Headwinds: Report
The final quarter surge was powered by a 10.8 per cent rise in construction activity, improved manufacturing momentum, and solid performance in services, particularly financial, real estate, and professional sectors You're reading Entrepreneur India, an international franchise of Entrepreneur Media. India's economy posted a stronger-than-expected performance in the final quarter of FY25, with GDP growth clocking in at 7.4 per cent, according to a report by CareEdge Ratings. This brought the full-year growth to 6.5 per cent, a downshift from the 8.4 per cent average over the preceding two years but still resilient amid global headwinds. The final quarter surge was powered by a 10.8 per cent rise in construction activity, improved manufacturing momentum, and solid performance in services, particularly financial, real estate, and professional sectors. Gross fixed capital formation (GFCF), a key indicator of investment activity, rebounded to 9.4 per cent growth in Q4, offsetting some of the drag from a contraction in government final consumption expenditure. Private sector sentiment also showed signs of revival, with report data reflecting an uptick in investment announcements and completions in Q4. Electricity led the way, accounting for 37 per cent of FY25 investment announcements, while completed projects in manufacturing and power nearly doubled from the previous year. Manoranjan Pattanayak, executive director – Economic Advisory, PwC India, contextualized the picture stating, "Indian economy has shown enough resilience, given the global context and the growth witnessed in different parts of the world. Private sector demand has bounced back with private final consumption expenditure growing at 7.2 per cent in FY25 and investment also registering a good growth rate of 7.9 per cent on an average over the last eight quarters. As per IMF estimates, India is expected to grow at 6.2 per cent in FY26, retaining its position as the fastest growing major economy in the world." The report projects GDP growth to moderate further to 6.2 per cent in FY26, a trend influenced by mixed consumption signals and softening external demand. Still, future sentiment remains upbeat across both demographics, bolstered by rising rural wages, up 6.1 per cent year-on-year in February, and easing inflation. Consumer price index (CPI) inflation dropped to 3.2 per cent in April 2025, the lowest reading since August 2019. This moderation was driven by favorable agricultural conditions, including a promising Rabi harvest and adequate reservoir levels. Yet, food inflation remains sticky due to steep prices in edible oils and fruits. It is expected that CPI inflation will average 4 per cent in FY26, down from 4.6 per cent in FY25. Despite the headline growth, there are deeper structural concerns. Gross domestic savings declined to 30.7 per cent of GDP in FY24 from 32.2 per cent in FY15. Notably, household savings continued to fall for the third consecutive year, now down to 18.1 per cent of GDP, while household financial liabilities surged to 6.2 per cent, nearly double the level seen a decade ago. On the fiscal side, the Centre's FY25 deficit came in at INR 15.8 trillion or 4.8 per cent of GDP, slightly above revised estimates. While corporate tax collections outperformed expectations, shortfalls in income tax and GST collections dragged down total revenues. Lower revenue expenditure helped cushion the gap. Pattanayak is still optimistic about the future stating, "Even as global uncertainty, trade woes and geopolitical risks pose headwinds, domestic fundamentals remain strong amid a supportive monetary-fiscal policy environment. In the coming quarters, economic momentum is expected to benefit from a benign inflation trajectory, contained international oil prices, robust consumer spending, government's strong capex push and transmission of RBI's 100 basis points of rate cut delivered in this calendar year."
Yahoo
2 days ago
- Business
- Yahoo
Federal Reserve Warns Trump's Economy Is About to Get Whole Lot Worse
The Federal Reserve is forecasting aggressive stagflation for the remainder of 2025. Inflation is expected to go up to 3 percent, GDP growth is expected to fall by 1.4 percent, and unemployment will rise to 4.5 percent, the Fed announced Wednesday. This report comes as the Trump administration weighs further aiding Israel in its war on Iran, a move that could seriously destabilize the region and multiple economies, including our own. There's also Trump's 'One Big Beautiful Bill Act,' which is expected to add $2.8 trillion to the deficit and reward tax cuts to wealthy individuals and corporations while slashing Medicaid and other social welfare programs. Fed Chair Jerome Powell took to the podium on Wednesday to reaffirm what he's been saying for months: This economic downturn is a direct result of President Trump's tariffs. 'Increases in tariffs this year are likely to push up prices and weigh on economic activity. The effects on inflation could be short-lived, reflecting a onetime shift in the price level. It's also possible that the inflationary effects could instead be more persistent,' Powell said. 'Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately, on keeping long-term inflation expectations well-anchored.' The Fed has refused to cut interest rates as a result of the projected stagflation. Trump has yet to comment on the Fed's report.
Khaleej Times
3 days ago
- Business
- Khaleej Times
UAE economic growth likely to hit 5% this year, expert says
The UAE's prudent economic policies and diversification efforts are likely to push GDP growth rates to five per cent, an expert said. 'The UAE's 'connector economy' role is the main factor to its success, underpinning trade and capital flows into the country. Booming construction and real estate sector as well as push for higher productivity through investments into IT and specifically AI infrastructure will support strong growth momentum,' Yerlan Syzdykov, Global Head of Emerging Markets at Amundi, told Khaleej Times in an interview. The World Bank last week raised its forecast for the UAE's economic growth to 4.6 per cent this year and 4.9 per cent next year, citing robust expansion in both hydrocarbon and non-oil sectors. Syzdykov sees a long-term prospects for growth in GCC countries as very promising, booming consumption coupled with increasing participation rate in most of GCC economies. 'In the short term, we see strong growth momentum, underpinning our forecasts of 3.5 per cent for 2025 for the region at large,' he added. The tariff war has mostly had an indirect effect on GCC economies, mainly through the impact on oil prices driven by negative effect of trade wars on global growth and demand for energy. 'At the same time, the associated increase in capital and trade flows within Global South fuels further growth of 'connector economies' such as UAE,' Syzdykov said. The budget assumptions for price of oil vary across different GCC countries, and the most optimistic forecasts behind government revenues come from Kuwait, Saudi Arabia and Bahrain. 'In case we see slower global growth and increased supply of oil, investors will look for significant fiscal adjustment that will be needed to balance the budgets. The two least affected countries with most conservative oil price in their budgets are UAE and Qatar,' Syzdykov said. Oil markets remain in a soft stage as global tariff wars fuel uncertainties over the demand outlook. 'In case we see softer oil prices, the governments [in the GCC] will need to diversify the sources of funding, which will incentivise them to continue pushing for more IPOs,' Syzdykov said.
