September continues to bite equity markets. Stocks everywhere wobbled again this week and even though they bounced back, the S&P500 is down around 8% in US Dollar terms for the month. UK investors might notice less of a fall, with global equities down just 1% in sterling terms. This is partly due to the fall in sterling itself, with the pound suffering yet again from adverse Brexit news.
Stock markets have stabilised and started trading sideways, in a sign of healthy consolidation following their extraordinary recovery rally since late March. Notably, the darlings of the recovery, namely US large cap tech and growth stocks, are no longer the leaders. This bodes well for a gradual sentiment shift among investors.
September has ended what now feels like a ‘goldilocks’ summer for investors, and political, societal and capital market frictions have returned to the stage with a bang. However, the fact that stock markets have not simply plunged on bad news, but have instead remained surprisingly stable, is a good indication that economic and market dynamics are not quite as simple as they may appear.
Markets’ summer holidays are over. Throughout August, risk assets made some impressive gains, while the global economy remained in its deepest ever recession. After equities were then catapulted to eye-watering valuation levels, the end of this week saw a sharp reversal. On Thursday, the US’ S&P 500 – which soared past its pre-pandemic highs in August’s rally – saw its biggest sell-off since June.
Whether you have earned your wealth, inherited it or made shrewd investments, you will want to ensure that as little of it as possible ends up in the hands of the taxman and that it can be enjoyed by you, your family and your intended beneficiaries.
In a week where Donald Trump kicked off his re-election campaign in earnest, global investors showed it is indeed “America first”. US equities continue to push at all-time highs, having recovered everything lost in March’s frantic sell-off – and then some.
Capital markets were mostly steady – if a bit on edge – this week, as they have been for most of August. At least the US maintained positivity, although the extent of gains were not spectacular. Even so, both the Nasdaq and S&P 500 indices surpassed their February peaks in midweek trading, leaving the stock market nosedive of March a distant memory.
The pleasures, and then increasing discomfort, of the UK’s unusually broiling August weather offered a welcome distraction from the seemingly never ending COVID news flow of gloominess. As the heatwave came to an end with a thunderous bang, so too did many of the UK’s summer freedoms.
At the other end of the scale, poor returns from Japanese and UK equities confirms the trend of investors preferring long-term growth prospects of the ‘new economy’, versus short term earnings stability or recovery potential (value) of the ‘old economy’. This has much to do with the fact that the yield investors could safely earn...
As July ends with stifling temperatures, thoughts can turn to the month ahead. August capital markets can be either quiet or decidedly choppy. As investors go on their summer holidays, daily trade volumes decline and liquidity drops out of the market – meaning even small buying or selling pressures can have outsized effects. Of course, this year we doubt many traders will be planning an August trip to Spain...
Earlier in the week, Europe’s top politicians slogged through marathon negotiations to reach a historic deal on a €750bn common budget designed to spur recovery from the deepest recession since World War Two. We cover this in more detail separately below, but suffice to say that investors took it well, with the Euro gaining on other global currencies.
The summer season has started in earnest and yet, unsurprisingly, this year everything feels different. Most of us are relieved restrictions are easing, meaning we can go about our lives more like how we were used to until a few months ago. While in lockdown, many may have reasonably expected that – in return for our sacrifices – we would emerge into a post-COVID environment, with the virus no longer a threat, and with normalities resumed.
Rishi Sunak’s short time at the Treasury has been a trial by fire. A year ago, the current Chancellor of the Exchequer was Chief Secretary to the Treasury under former Chancellor Sajid Javid. But after Javid’s controversial sacking in February, Sunak’s foot was barely in the door of Number 11 before the global pandemic shuttered Britain’s economy...
We are halfway through the most disturbing year in generations and that much-used word won’t go away: unprecedented. Over the course of the first quarter, it became steadily more probable that the coronavirus crisis that had started in China would engulf everything around us. In late February, stock markets finally faced up to the inevitable and nose-dived. Investors’ mad dash for the exit accelerated throughout March, turning the sell-off into a sell-out of tradeable financial assets, resulting in the most rapid stock market crash on record.
The consolidation in stock markets continues. After a brief sell-off at the beginning of the week, capital markets staged a recovery to leave things almost unchanged from a week ago. All in all, markets are now just slightly above where they were after the significant recovery rally throughout April and May...
After three months of shutdown, Britain is slowly but surely opening up. The government has been keen to stress that this process is only possible because of the steadily falling infection and death rates across the country, but clearly the relaxing of restrictions is also prompted by economic concerns. With pubs, clubs, shops and many other businesses shuttered since the end of March, the UK economy has been on life support. For many businesses, the government’s furlough scheme and emergency loan measures have been the only thing keeping them afloat.
Reading the news seems much more complicated these days. Our friend and old colleague, Rob Martorana, has lived and worked in New York all his life. An excellent portfolio manager and great thinker about investments, Rob has written a series of articles for the Chartered Financial Analyst group about how to digest news in a way that takes account of its underlying biases. The easy way to do this is to pick a sample from media sources with known biases to judge the central case and the range of interpretations.
The stock market recovery that started on 23 March – and was widely regarded as little more than a soon-to-falter bear market rally – consolidated further over this last week of May. By now it is either the most pronounced bear market rally in history, or we have indeed already witnessed the turning point of the equity bear market that accompanies recessionary periods...
Over the past week, it felt as if the new normal of enforced idleness paired with less stringent lockdown rules and summer weather would lead to a happier mood across Western Europe, including the UK. The same applied for investors, whose portfolios also enjoyed some time in the sunshine. However, the outlook began to cloud over somewhat again towards the end of the week.
In the absence of truly effective anti-viral drug treatments against COVID-19, or vaccines (even in the best case) only becoming widely available towards 2021, we cannot seamlessly switch back on what we switched off and many activities that make up considerable parts of our western economies will take much longer to return than a V-shaped recovery would require. This means that the recession the lockdown has caused is likely to last somewhat longer and be more pronounced in sectors that depend on close social proximity...