Consumer confidence is at a record low and retail sales are showing the discounting trend

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  • UK consumer confidence plunges to 50-year low amid worries about cost of living and wider economic outlook
  • Evidence that shoppers are determined to look for bargains amid the cost of living crisis
  • FTSE 100 unfazed by falling confidence and wider risks as week winds down
  • Brent crude is expected to end the week lower, reflecting concerns about a global economic slowdown and potential supply boosts from producers.

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Q2 2022 Hedge Fund Letters, Keynotes and More

Sophie Lund-Yates, Principal Equity Analyst at Hargreaves Lansdown:

Hayden Capital 2Q22 Performance Update

no name 12Hayden Capital’s performance update for the second quarter ended June 30, 2022. Second Quarter 2021 Hedge Fund Letters, Keynotes and More Dear Partners and Friends, The markets continued to sell off during the second quarter, especially for internet based businesses. This year continues to be the toughest stretch for us since Hayden’s inception. Concerns about inflation and the Read more

“UK consumer confidence has fallen to its lowest level since comparable records began as the rising cost of living casts serious doubt over people’s personal finances, while broader concerns about economic slowdown are also a source of anxiety. In GfK’s monthly survey, the August index score for consumer confidence fell to minus 44, from minus 41 the previous month. This move did not is surprising as prices are rising in double digits while we are seeing the biggest drop in real wages in over 20 years. The reading of this for the wider economy is that we now know as certainty that nerves are getting worse, not better.This has far-reaching implications for corporate margins, as we are likely to see an increase in discounting as well as a sustained trend of bargain hunters.

This is precisely what the latest figures from ONS Retail have shown, where online discounters helped boost retail sales in July compared to June. However, sales fell in three months and compared to 2021 three-month volumes fell by 4.9%. The data implies a steep price increase of 10.4% over the year which simply cannot be sustained by many customers. Non-food store sales volumes fell 0.7% from July, while food sales were barely up. This involves a deliberate shift away from non-essential spending, and even when buying everyday items, what is loaded onto the conveyor belt is tightly controlled. This trend is unlikely to reverse as long as inflation persists. Bringing inflation back in line is a big call, with the underlying causes of rising commodity prices and supply bottlenecks difficult for central banks to address through interest rates alone.

The FTSE is undeterred by the gloomy mood music, largely because it has already been priced in, with the FTSE100 struggling to find its footing in the year to date. There have been reports of more consumer unrest for some time.

Brent crude is around $96 a barrel as it is on track to end the week lower as worries about a global economic slowdown and possible supply increases from major producers outweigh signs of a stronger fuel demand. Recession fears are rising, especially as the US Federal Reserve appears set on further raising interest rates, which while aimed at controlling inflation, raises more questions about the ability of economy to recover”.

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