Despite Wednesday’s bounce, stocks are finding it hard to maintain their recent strong run.

Risk assets wobbling in afternoon trading

“It looks like this relief rally is beginning to run out of good news. After a solid earnings season so far, stocks are facing a period where the sheer number and also the profile of those stocks reporting are beginning to decline. Fundamentally, the dip buying over the past month has been valuation-based, and with earnings estimates for coming quarters still heading lower stocks are rapidly running out of room for more gains. Recession concerns seem to be returning too, a point underlined by the Bank of England’s comments in its meeting today.”

UK faces a tough few months

“UK stocks have enjoyed a decent bounce off the lows, but Andrew Bailey and co are clearly worried about the economy, and now expect a recession and two years of negative income growth. The pound’s slump in the wake of today’s MPC decision underlines the caution investors have regarding the UK economy, and suggests that the pound’s miserable performance thus far in 2022 is unlikely to change for the time being.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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