This is because, while he feels inflation will fall sharply in the second half of this year in the UK, energy prices are set to rise markedly as the government supports end.
He feels higher energy prices, even if overall levels of prices in the economy are falling, could dent consumer sentiment in terms of spending, and also embed a higher level of inflation than is currently expected.
Venetis said this caution, plus the tighter lending conditions in the economy will dampen inflation but also economic growth in the year ahead, with the inflation falling at a slower pace than otherwise might have been the case due to the higher energy prices.
All of that adds up to, he said: “The UK is a growth laggard among the major DMs, with real output likely to remain below its pre-pandemic highs this year and private investment essentially missing in action.”
He said the problem with any attempt by the government’s already high debt levels, and the much higher cost of debt now.
He said Jeremy Hunt’s recent budget, which focused on reforming the supply side of the economy contained measures which are “welcome” but that are “unlikely to move the needle” in terms of the immediate growth prospects for the UK economy.
Market movers?
In terms of what all of this means for investors, Rupert Thompson, chief economist at Kingswood, expects a mild recession in developed market economies this year.
He asked: “Where does this all leave us?
"We believe equities face some downside risk near term due to these overly optimistic earnings expectations and valuations which are on the high side.
"Against that, equities will continue to receive support from the prospect of rate cuts down the road and have upside potential further out, particularly outside the US.”
He added: “As regards bonds, there are some potential headwinds short term from renewed upward pressure on government yields and a widening in corporate spreads. But fixed income is now offering the highest returns for over a decade and yields have scope to decline longer term."
For this reason, Thompson said he believes all of the above warrants being "broadly neutral versus benchmark in terms of equity and bond allocations".
He explained: "Within equities, our view remains that the US will underperform going forward as its high valuations will be not supported by the super-low interest rates of the past decade.
"Within bonds, we continue to move away from our very cautious positioning of the last few years, both diversifying our holdings and lengthening their average maturity.”
