EU’s populist nations threaten to shoot themselves in the foot

For Europe, 2020 was supposed to be a fiscal awakening, with the pandemic putting paid to the issues that created the first Euro crisis; the Union’s lack of fiscal integration, its inflexibility on budget rules and inability to handle payment crises. The crisis affected the whole continent, threatening to burden health services and leave swathes…

Read more

New Asian trading bloc gets global respect

Bigger is better in trading blocs. And last Sunday, 15 East Asian countries signed an historic accord to form the world’s largest trading bloc, containing a third of the world’s population and accounting for around 30% of global GDP. The Regional Comprehensive Economic Partnership (RCEP) is bringing together the ten ASEAN members with their Northern…

Read more

More tunnel before the light

The November rally in stock markets finally petered out this week as it felt as if ‘November finally got the memo about 2020’. This was despite further positive vaccine news that bolstered optimism for next year. On Monday, US firm Moderna announced that phase 3 test results of its messenger RNA based vaccine had a…

Read more

A mini boom for the housing market?

With the US Presidential election now decided (barring unlikely success in the courts), and a coronavirus vaccine by the year-end now looking a near certainty, markets are feeling positive about the prospects for 2021. But as noted before, much of the growth story for next year hinges on additional demand generated by a step up…

Read more

China remains an exercise in risk management

This week, Beijing forced out several pro-democracy lawmakers in Hong Kong, declaring them a threat to national security and putting another nail in the coffin of the ‘one nation, two systems’ principle. The move gave the Chinese authorities the power to dismiss politicians without having to go through the courts. On Thursday, President Trump issued…

Read more

Change is in the air

Investors have enjoyed another very good week. Optimism had already returned the previous week, with the US election eventually delivering a clear verdict. This week then brought the news that literally everybody had been waiting and hoping for, and which we had portrayed as probable in our ‘optimistic case’ forward-look on these pages two weeks…

Read more

US election – the dust finally starts to settle

The American people have spoken; it just may take a while to figure out what they said. Since voting closed on Tuesday night, the US election has been nothing short of a rollercoaster. When initial results started filtering through, it looked like predictions of a comfortable Joe Biden victory were well wide of the mark.…

Read more

Lockdown 2.0 – at what cost?

Here we go again. Having had our fun, and eaten out to help out over the summer, the UK public is back indoors for the rest of November. What the government was keen to prevent still came as hardly much of a surprise last Saturday, given rapidly-rising hospital admission numbers, the tiered shutting of regions…

Read more

October market returns review

The up and down markets of September resulted in what we described as a flat overall picture of consolidating markets. At first, the picture for October looked much the same, but ended with a more pronounced sell-off over the past two weeks. The looming uncertainty of the US elections, together with the return of lockdowns…

Read more

Looking beyond the obvious

We wrote only last week that markets hate uncertainty. Given that equity, bond and commodity markets are all quite a lot stronger at the end of this week, many investors must have gained clarity, if not optimism. There are a lot of important things going on, too many to cover adequately even in our weekly,…

Read more

Central Banks join the Crypto currency party

We have seen some impressive returns in capital markets since the depths of March. US equities stole the limelight for most of the year, soaring above their pre-crisis highs in the summer, but equally impressive has been the rally in some of the less traditional assets. On a percentage basis, Bitcoin – the much-hyped cryptocurrency…

Read more

Investors bullish on China

As COVID fears rattled global asset markets earlier this week, one country was notably absent from the sell-off. China’s CSI 300 Index rallied in the midweek, while stocks across the US and Europe slid the other way. China’s breakaway from the pack has been noticeable for some time – out of the major global indices…

Read more
US Election

Unsettled week ahead – or behind

In the first article of The Tatton Weekly we normally discuss the relevance of the weekly news flow for the development of our longer-term picture for our investors. Usually, our conclusion is that the noises of the week need to be put into perspective and not overinterpreted, because the long term picture only very rarely…

Read more

Green energy overtakes Tech’s ‘Big Five’ as 2020 winners

Over the course of this year – and well before – we have grown used to the incredible outperformance of the US technology sector. Such is the size and strength of Silicon Valley that at times US mega-cap tech stocks have accounted for most price moves in the overall stock market. But tech has been…

Read more

Canary in the oil well?

Back in February, tumbling oil prices were a harbinger of things to come. It became clear the world was heading for a crisis – one that would eventually force governments to shutter their economies and plunge the global economy into its deepest-ever recession on record. The economic ice age to come would severely hamper oil…

Read more
Sun lit uplands or a Covid gorge

Sunlit uplands or COVID gorge?

Halloween is around the corner and markets had plenty to frighten them this week. Across Europe, the second wave of infections has risen higher than the first. While new lockdown measures are less stringent this time (schools and businesses can remain open unless social distancing is impossible), shutting down social interactions, just as the service…

Read more

India revisited

Indian equities have been on a roll. Since the global sell-off through the end of February and March, Indian stocks have recovered over 40%. That still leaves the Indian market down around 2% year- to-date, but compared to other emerging markets, India is faring well, outrunning China particularly over the past couple of weeks. One…

Read more
IMF

IMF: Austerity is not the answer this time

The International Monetary Fund (IMF) created considerable waves this week with mixed messages in its biannual world economic outlook. IMF economists now expect a decline in economic activity of 4.4% for 2020, with the slight increase from June’s forecast owing to better than expected growth in the second quarter of the year. The higher base…

Read more
Brexit Negotiations

Watching and waiting

A noticeable winter chill is in the air this week. The threat of fresh lockdown measures has become reality, with renewed restrictions coming into force not just in the UK, but across most of continental Europe as well. But unfortunately, the UK – once again – is faring particularly badly in virus terms. At the…

Read more
Big Tech

Busting the Big Five of ‘Big Tech’

The US technology sector is full of winners. For years now, the growth-intensive strategies of the Silicon Valley mega-caps have driven an astonishing rise to wealth, power and influence. Taking advantage of new and uncharted territory, they have achieved a level of dominance in their various markets that we have not seen for decades. In…

Read more
UK and EU

UK and EU

It may be the hundredth time saying this, but despite the all-dominating focus on COVID, it is now also Brexit crunch time, given the UK government rejected the offer of a further extension when the lockdown ‘sabotaged’ the already tight negotiation schedule. Britain’s official transition period of EU membership still only lasts until the end…

Read more
Global Markets

Baffling market optimism

Following the unsteadiness of September, markets have further regained their composure and continue to drift upwards. This stands in stark contrast to the flow of bad news. The White House, centre of power for the mighty US, has become a COVID hotspot, similar to many regions across Europe and the UK. Meanwhile, the Brexit negotiation…

Read more
Global Stock Markets

State of the global economy

Throughout the middle of this year, we saw an impressive bounce back in economic activity. While the global economic shutdown had frozen business and manufacturing activity, the opening-up into the summer months suggested we may be on course for a sharp V-shaped recovery. Purchasing Managers’ Indices (PMIs) – a survey-based measure of business confidence –…

Read more
Stock Market Returns

Taking stock of market returns up to September

Against all expectations, and despite considerable intramonth volatility, September turned out to be decidedly dull for investors. After a five-month rally had left global stock indices around or above their pre-pandemic highs, the turn of Autumn sent a chill through capital markets. Selling pressure built up early in the month, as COVID cases spiked around…

Read more
UK and US markets

A question of time horizons

A US presidential debate that nobody would want to watch twice was followed by reports that COVID reality has finally caught up with a US president who insists that only he can determine  what is real and what is fake has made for a dramatic October start. The UK’s domestic perspective was not much less…

Read more
Commodities

Reflation Reality Check

As rain and wind flush out the heat of the last few months, there’s a noticeable chill in the air for capital markets. For investors, things looked bright between June and August. The economy was finding its feet again, lockdown restrictions continued to lift, and central bankers were committed to indefinite monetary accommodation. As such,…

Read more
HSBC Bank

FinCEN files – don’t bank on banks?

Given the roller-coaster week it has been for markets, the economy and everything else, you would be forgiven for missing a story about bank reports. But this week’s release of the FinCEN files – so called after the US Financial Crimes Enforcement Network – contained plenty of intrigue, from fraud and money laundering to Russian…

Read more
Road to Recovery

A Recovery On Hold

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…

Read more
Federal Reserve

Can the Fed redress a 40-year imbalance between workers and savers?

Who does monetary policy work for? The simple answer is everyone, but given that one of the defining aims of a central bank is to ensure monetary and financial stability, perhaps a more historically accurate answer is savers (owners of financial assets). Through interest rates and other means, central banks hope to provide a stable…

Read more

Brexit bother as Boris’s Mexican stand-off misfires

Having spent most of 2020 hoping things can get back to normal, Britain’s political news over the last couple of weeks has left us thinking ‘be careful what you wish for’. Stalling Brexit talks, political disarray and the potential for a full-blown constitutional crisis all created that familiar feeling of prepandemic times. Indeed, as if…

Read more
Global Stock Markets

Taking a step back to look forward

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. Capital is no longer…

Read more

Politics get in the way of Chinese investment

In economic terms, China is one of the best placed of any major economy to recover from the pandemic. The first country to suffer heavily from Covid was also the earliest to emerge from lockdown, with life now well on its way back to normal in the world’s second largest economy. Wuhan, a city of…

Read more

Credit where credit is due

Central bankers have played a vital role throughout the COVID crisis. With the global economy in the grip of its deepest-ever recession, the world’s central banks have had to inject huge amounts of liquidity into the financial system and government coffers to stop the health crisis turning into a financial catastrophe. The US Federal Reserve…

Read more
Stock Markets

Frictions and contradictions

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…

Read more

August gets technical

Despite the sharp sell-off we saw into the end of this week, capital markets overall have cruised through the summer. The US stock market soared past its pre-pandemic highs, powered by America’s mega-cap tech giants, while others (with the exception of Japan) saw more muted price action. With traders and the investing public away in…

Read more
Inflation ahead

Inflation now a ‘Made in China’ product

We are in a new era for central bankers. Last week, US and global monetary policymakers convened for their annual Jackson Hole conference, headlined by a speech from US Federal Reserve (Fed) Chair Jerome Powell. But Powell’s keynote address was noticeably different from previous years – and not just because neither speaker nor audience were…

Read more

Market dynamic of a K-shaped recovery

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…

Read more

US bankruptcies: expected but not altogether undesirable

As we have written many times, the deepest global recession in the post-war period is no ordinary one. With activity suppressed by government diktat, it is hard to gauge how much of the plummet in demand is ‘real’ and how much is just a – hopefully short-term – virus response. To judge where the forced…

Read more

Apple stock split has domino effect on indices and trackers

Next Monday (31 August), Apple will split its shares four to one, meaning holders of Apple stock will have four shares trading at a price of $125 instead of one share at the current price of $500. This is Apple’s fifth stock split, aimed at making the stock more accessible to new investors (it is…

Read more

Big tech gets bigger while the Fed takes the easy option

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. If the stock market soaring to new heights while the world languishes in its…

Read more
Car Market

Auto-recovery: turnaround or short-term bounce?

Like most industries, the automotive sector has been hit hard by the pandemic. Carmakers were already struggling well before the first COVID case came in, with changes to emissions regulations, a global manufacturing downturn and structural shifts in demand providing fierce headwinds. A global economic shutdown then came at the worst time it could, as…

Read more
Apple vs Epic Games

Apple finds itself fighting an Epic battle

And Apple wept, seeing as it had no more worlds left to conquer. In 2018, Apple made history by becoming the first private company valued over $1 trillion. That milestone was 42 years in the making; but just two years later, Apple is worth double that. To make that feat even more incredible, the meteoric…

Read more
Stock Market

Fed leaves bond investors with that sinking feeling

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…

Read more
Rainy Day Fund

The US government’s intriguing $1.7 trillion rainy day fund

These extraordinary times for the global economy have forced the world’s central banks to extraordinary measures. As usual, the US Federal Reserve (Fed) has been one of the chief protagonists during the emergency, cutting interest rates close to zero and funneling trillions of dollars into keeping the financial system afloat. But in recent weeks, we…

Read more
UK Recession

Please sir! How long will the UK stay bottom of the class?

Throughout the pandemic, the UK has been beset by a host of unflattering comparisons. The statistics on virus cases, deaths and other health figures have consistently put Britain as one of the hardest hit countries in the world. This week, the press focused on a different kind of bad news: In GDP terms, the UK…

Read more
Coronavirus - the sequel?

COVID II the sequel – as scary as the original?

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. The reintroduction of widespread lockdowns at local level,…

Read more
Property Market

Property funds not such hot property

Property can be an attractive investment. Like everything else, property prices have their ups and downs, but investing in ‘real’ assets can appear to hit a sweet spot, relative to financial assets like equities, bonds or cash. There is enough of a positive yield that holding it is preferable to holding cash, and not so…

Read more
Unemployed

Unemployment – a tricky economic variable

At the Bank of England’s (BoE) latest meeting this week, a more optimistic than expected short-term outlook for Britain’s economy emerged. One of the most notable forecasts was its call on employment. While furlough and other emergency government measures have allowed many to keep their jobs and paycheques, some fear these policies are just papering…

Read more
The New Normal

Living with COVID- settling into an interim ‘new normal’

Compared to the rest of 2020, July proved almost uneventful as global capital markets consolidated strong gains made during the previous quarter, with only emerging market equities and gold delivering notable advancements (see returns table further below). At the other end of the scale, poor returns from Japanese and UK equities confirms the trend of…

Read more

Summer sunshine beckons, but politics still casts a long shadow

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,…

Read more
Stock Market

Earnings season round-up: plenty for markets to mull over

Although stock prices have come down recently, the ratio of price to earnings remains high enough to make investors squeamish. As such, eyes are now turning to the recent slew of earnings reports from the second quarter. Q2 was, of course, dominated by virus news, global lockdowns and a record slump in economic activity. And…

Read more
US Economy

US partisan politics could leave states feeling the pinch

In dealing with the economic crisis – just as with the virus itself – policy is crucial. Throughout the worldwide economic shutdown, US authorities have joined their global peers in providing intense and sustained support to a shell-shocked economy. The government’s fiscal aid programs, backed by the extraordinary bond purchasing programme from the Fed, has…

Read more

EU recovery package: European, limited but still historic

European Union (EU) leaders never let a crisis ruin a good argument. With the global pandemic forcing Europe’s economy into its worse slump since the second world war, EU heads of state butted heads during a tense Brussels summit, for four days and four nights. Their aim was to agree terms on a coordinated spending…

Read more

Going for gold

Gold prices have been on a good run lately. On Thursday, gold reached an intraday high of $1898 per troy ounce, within touching distance of its all-time high of $1921 back in 2011. Physical or safe-haven assets typically benefit from periods of unease or uncertainty. Gold’s credibility comes partly from its centuries-old use as a…

Read more

PPE = Politics, Pressure and Economics

In this delicate economic and financial environment, the world of politics can have a big impact on capital markets. This week, we saw both heads of that political beast, with news stories first buoying and then bruising market sentiment. Earlier in the week, Europe’s top politicians slogged through marathon negotiations to reach a historic deal…

Read more

Discomfort of disappearing safety nets

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…

Read more

Sector rotation or just a timely recalibration?

Investment professionals have many different methods for slicing up the investment world. Typically, we tend to group assets together in terms of region, asset class or sector. Looking at things sector by sector is helpful for judging what to overweight and when, since different industries will react differently to underlying economic conditions (for example, technology…

Read more

US election: Joe is no longer Biden his time

Americans head to the polls in just under four months, and as we edge ever closer to the election, presumptive Democrat nominee Joe Biden’s lead over Donald Trump has grown steadily wider. According to the latest figures from FiveThirtyEight, the former Vice President has the support of 50.3% of the US public, while the current…

Read more