Finimize - 🇬🇧 Britain's looking different

What’s going on here?

The UK flouted economists’ assumptions, with inflation flagging in August.

What does this mean?

Inflation-watching isn’t an edge-of-your-seat pastime these days, and the world’s all-too-predictable prices mean that economics enthusiasts only truly light up when a piece of out-of-the-blue data drops. That’s why Wednesday’s British consumer price index reading was such a blessing for macroeconomic anoraks: prices rose by 6.7% in August from the same time last year (or 6.2% stripping out volatile food and energy) – in short, by much less than expected. And sure, that figure’s still higher than it would be in an ideal world, but it’s a massive step in the right direction.

Why should I care?

Zooming out: Cool Britannia.

Up until now, pundits and economic forecasters have taken Old Blighty as a kind of punching bag – bemoaning Britain’s unproductive workforce, political disarray, and Brexit woes. But economic narratives can turn on a dime, so you can expect some chirpier outlooks after this latest inflation reading. After all, the Bank of England was slower than its US counterparts when it came to jacking up interest rates, so it only stands to reason that it’s taken longer for inflation to cool.

For markets: Building expectations.

If the UK is indeed on the same path as its pal across the pond, then you can expect whisperings about interest rate cuts at some point next year. And you don’t need to be a budding Oppenheimer to work out that lower rates might result in cheaper mortgages – which might, in turn, equal stronger demand for housing. Just take a look at the States: rate-cut hopes have seen a key homebuilding ETF jump more than 30% this year. It’s no surprise, then, that UK builders' stock prices also leaped when these inflation figures emerged.

What’s going on here?

ARK Invest is casting its net across the Atlantic, snagging European counterpart Rize ETF.

What does this mean?

Cathie Wood, ARK’s captain, has always sailed a steady course: even during the 2022 tempest, she held firm to the belief that the tech tide was just beginning to rise – and judging by 2023’s AI-driven market surge, she wasn’t wrong. But it’s not all been positive: a few navigational errors in recent years have thinned out ARK’s asset treasure chest massively, so the purchase of Rize might just be the compass the firm needs. At the very least, it’s a savvy strategy to replenish the assets ARK’s managing.

Why should I care?

Zooming in: Missing the tide.

On the face of it, ARK’s flagship Innovation ETF has grown by a respectable 36% this year. But when you realize it’s still anchored 70% below its 2021 peak and trails the Nasdaq 100’s 39% rise, it’s clear the firm’s hit some rough seas. And the fact of the matter is that ARK’s stockpickers have come up short. Case in point: offloading Nvidia earlier in the year, and missing its meteoric ascent. Given that the stock would have been perfect for a tech fund focused on long-term investments, that’s not just a misstep: it’s walking the plank.

Zooming out: European catch-up.

Performance aside, ARK’s visionary calls have been on the money, and this move into Europe looks particularly savvy. After all, ETFs currently make up just 8% of European investments, according to ETF giant iShares, compared to 12% in the US. Plus, the US tech sector, now a colossal 30% or so of the S&P 500, was a mere 10% ten years ago – and Europe could be on the cusp of something similar.