Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

SHARES are holding their breath while bonds come under pressure as investors wait for clarity on how far and fast the US central bank will raise interest rates this year.

All eyes on the Fed

This week’s highlight will be the publication on Wednesday of the minutes from the Federal Reserve’s March meeting. In the wake of more red-hot employment data last week in the US, investors are desperate for signs that the Fed is getting ready to crank up the pace of monetary tightening. Fed officials are queuing up to argue for a half point rise in rates next month. That might not sound a lot but it’s more than 20 years since the Fed last hit the market with more than a quarter point hike. The consensus is that rates need to rise to a neutral rate of around 2.5% as quickly as possible. One bank, Citi, thinks the next four hikes will all be double helpings.

High risk strategy?

The Fed is walking a tightrope. It needs to tame inflation without breaking the economy. Can it achieve the fabled soft landing or will its more aggressive stance trigger a recession? One key indicator is flashing red today. The so-called yield curve, which measures the relationship between short and long-dated bond yields is now sloping down. Long yields are lower than short ones, which suggests that interest rates may be on their way up now but will soon be going in the opposite direction. An inverted yield curve has a good record of predicting recessions, which is why investors consider it to be a big deal.

Not all bad news

Chinese stock markets have had their fill of bad news in the past couple of years. But this week the glass looks half full after an announcement over the weekend that Beijing will allow US-listed Chinese companies to share their books with American auditors. The policy U-turn by the Chinese authorities is designed to defuse a political stand-off that threatened 270 companies, with a market value of more than $2trn, with a delisting in 2024. Shares in Hong Kong rose sharply at the start of the week, with the Hang Seng Tech index up 5.4%.

And you thought we had an inflation problem….

Prices may be rising fast around the world but nowhere is the spike in commodity prices having a bigger impact than in Turkey. Inflation there has just hit 61%, a 20 year high, as food costs increased 70% year on year and energy doubled. President Recep Tayyip Erdogan, a self-styled ‘enemy of interest’ has blocked his central bank from raising interest rates.

Old year out, new year in

The UK’s tax year ends tomorrow, which means there’s just 24 hours to go to take advantage of this year’s ISA and SIPP allowances. Want some ideas? Take a look at our recent fund recommendations. And watch out for our quarterly Investment Outlook, available from next week.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Select 50 is not a personal recommendation to buy or sell a fund. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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