The World In A Week – House Rules
Inflationary pressures continue to be one of the leading concerns with strong expectations that there is significant pent-up demand for goods and services as economies start to unlock from lockdowns. However, European Central Bank policymakers stated they saw no evidence of sustained inflationary pressure. Should there be strong spending activity in the coming months, we would expect supply chains to be impacted which would cause prices to rise. Alongside the strong pent-up demand, the level of consumption that is ready to be deployed should not be underestimated as consumers have seen their savings rate increase substantially and the increased demand for luxury brands has already demonstrated this. Several officials from the Federal Reserve have also commented that they expect this inflationary pressure to be temporary. We have started to see the emergence of this inflationary pressure as the US Commerce Department reported on Friday that its core personal consumption expenditure price index increased 3.1% in the year (ended 30th April). This exceeded the Federal Reserve’s 2% target and was the biggest increase in nearly three decades.
House prices in the UK rose 10.9% compared to 31st May last year according to the UK Nationwide house price index. The lifestyle shift, increased savings rate and stamp duty holiday has accelerated the demand for housing in more rural areas, where the need to be within a short commuting distance has diminished. However, the development of new houses has not accelerated at the same level and there is significant excess demand in the housing market today, causing the significant rise in prices.
US financial authorities are set to take a more active role in the regulation of the $1.5tn cryptocurrency market with overriding concerns that investors may be harmed. Cryptocurrency has been one of the leading themes over the last year with Bitcoin, one of the major coins, reaching highs of $60,000 in April before pulling back substantially to $34,750 and remains a very volatile and unstable store of value.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 1st June 2021.
The World In A Week – Nul Points
Global equity markets ended the week marginally negative, but under the bonnet there was a high degree of volatility over the five trading days, with the S&P 500 in the US down over -2.5% at one point, only to bounce back strongly and end a smidge below its all-time high.
Much of the volatility was driven early in the week by the crypto meltdown. We saw the Chinese government continue to crack down on cryptocurrencies, banning financial services and payment companies from providing services related to crypto by stopping trading, clearing, and settling via crypto. The Government said, “cryptocurrencies are not supported by real value” and warned private investors against speculative trading. At the same time, we saw Elon Musk, owner of Tesla, perform a 180-degree U-turn on the asset class, suspending vehicle purchases via Bitcoin, citing climate change concerns as the reason. Furthermore, there is the threat of a possible tax clampdown in the US. As a store of wealth or viable form of money, these headwinds are causing the huge degrees of volatility we are seeing and must really make the most ardent supporters’ waiver.
There has been speculation whirling for a while, but Amazon is now reported to be making a $9bn bid for MGM, which might put a fresh shine on some old classics. Amazon has over 200 million Prime subscribers, of which 175 million stream Prime Video, according to CEO Jeff Bezos. MGM has a huge back catalogue of content covering over 4,000 titles with household names such as James Bond, The Hobbit and Rocky. A profitable and expanding franchise for the Amazon empire.
Mergers and Acquisitions (M&A) was also evident in the UK, with private equity firm KKR bidding £2bn for John Laing, the UK infrastructure company. M&A is a theme we have seen at play in the UK market over the last few months as UK assets look cheap and offer good value to potential buyers, one of the reasons that Beaufort Investment decided to increase its UK equity allocation from neutral to overweight back in February.
Finally, coming to the biggest shock or non-shock of the week – the UK’s entry scored ‘nul points’ in the Eurovision song contest leaving the UK, the Brexit bad boys, left out in the cold….. Hardly market moving, but all good harmless fun, watched by millions across the continent.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 24th May 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - A Tiered Wall Of Worry
COVID-19 weighed on sentiment, with cases globally increasing throughout the week. In Europe, figures jumped by more than 625,000, which meant new restrictions were implemented in the UK, France, Germany, Spain and the Netherlands. A worrying trend was also observed in Germany and Italy, who had previously managed to avoid a second wave of contaminations, saw an acceleration in such cases. The US also did not go unscathed, figures spiked to their highest level since July, with a recording of 350,000 in weekly cases.
As a result of a jump in cases, we expect fourth quarter growth will be subdued. Despite this, the International Monetary Fund (IMF) has revised its global growth forecasts higher for 2020, noting a better-than-expected rebound in post-lockdown activity. However, while growth has been revised upwards for 2020, the IMF has cut their outlook for 2021 citing the impact of persistent and reinforced social distancing measures.
Brexit negotiations continue to show little sign of progress, as neither the UK nor the EU is prepared to compromise. Planned discussions for the week ahead have been downgraded to a phone call, as No. 10 felt there was ‘no point’ in continuing if the EU is not prepared to discuss detailed legal text of a partnership. Fishing rights and state help for businesses is the latest bone of contention and has caused negotiations to falter. Moody’s has downgraded the UK’s credit status on the back of falling economic strength, as a direct result of the coronavirus pandemic and uncertainty over Brexit. We expect Brexit negotiations to feature heavily in the week ahead.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 19th October 2020.
The World In A Week - Focus On Floating
Last week was ultimately centred around the US Presidential Election. It started with an article on the lack of tax that President Donald Trump has paid and finished with the Commander-in-Chief of the US Armed Forces testing positive for COVID-19.
In the middle of this we had our first televised debate between Donald Trump and Joe Biden. While the debates are important to see how the candidates handle each other, it is the spin put on afterwards that really matters. Not to committed voters though, as they will not change their views; the spin is purely directed at the undecided voters.
Voters in the US are extremely polarised; you are either staunch Democrat or staunch Republican. Therefore, the debates and stories are targeted towards the floating voters, which is estimated to be around 10% of the voting population. So, do debates and stories matter? It does when the most recent US presidential elections were won on such narrow margins, so albeit small the floating vote is still large enough to affect the outcome of the race to the White House.
With the vote less than a month away, both candidates will be looking to gain as much airtime as possible. This is now complicated with President Trump having contracted COVID-19, putting future televised debates in jeopardy.
It is not just the President who has tested positive; many Republican Senators have also caught COVID-19, meaning the Senate will not be able to vote on any proposals for the next two weeks. This will delay the proposed fiscal stimulus package, which needs to be voted upon in the Senate, and could result in fear creeping back into the economy.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 5 October 2020.
The World In A Week - Tax becomes less taxing
The Organisation for Economic Co-operation and Development (OECD) published its latest economic outlook last week. There were no hidden surprises in the 221 pages, whose narrative echoed that the pandemic continues to cast a long shadow over the world’s economies, with the silver lining being an improved prospect for the global economy due to vaccinations and stronger policy support. However, the path to recovery will be an uneven one.
The headlines gave a forecast for global growth of +5.75% in 2021 and +4.4% in 2022, a sharp rise from the decline of -3.5% in 2020. The biggest risks revolve around the deployment of vaccines not being fast enough to stop the transmission of the virus and the emergence of new, more contagious variants. This will hamper the pace at which containment measures can be relaxed and stifle the expected boost to consumer confidence and spending.
A relaxation in lockdown measures did allow for the G7 finance ministers to meet face-to-face in Cornwall over the weekend. Global taxation was highest on the agenda and it was agreed that global corporate taxes should have a minimum level of 15%, and large companies with a profit margin of at least 10% should be taxed where they conduct business. If negotiations go well, the agreement could be extended to the G20, and could see the end of countries competing on lower tax levels and an end to the race to the bottom.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 7th June 2021.
© 2021 Beaufort Investment. All rights reserved.