US GDP will clear the uncertainty on the economy, Is a UK rate hike necessary?

Bill Blain, Strategist at Mint Partners Ltd., joined Tip Tv today to offer his observations on the stocks and bonds, US GDP and rates, and the rate hike scenario in the UK.

Key points from the video:

US GDP: Buy bonds or stocks?

December Fed rate hike will be a mistake

Uncertainty on US stocks

Is the UK rate hike necessary?

US growth and the Fed

Blain notes that as the Fed said, the US economy will be in a clear position after today’s Q2 GDP data release, which will further lead to a shift in rate hike expectations. He suggests buying stocks on a strong US growth number, whereas a lower number should be used to buy bonds. With market expectations for a September rate hike remaining high, Blain explains that Setpember should be the likely timing than December when the liquidity will dry.

Concerns rising on US stock markets

In the USA, the stock market is a major topic of concern, according to Blain. Bloated values of tech stocks while traditional companies are trading on modest PE’s is creating further uncertainty.

UK: Why do rates have to go up?

Blain says this is the question which markets should be asking. Energy costs are low and no inflationary pressure in seen in the economy. He further explains that the rate hike agenda is a more fundamental issue. Five years of zero percent interest rates has not created growth. Corporates have resorted to tactics like borrowing at lower rates only to buy back stocks. Investment was not seen from the companies.

Blain signs off with the message that, this rate rise indication by the Bank of England might encourage corporate to behave like proper capitalists.

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