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20 May 2019

Shifting trade politics should not be ignored.

Recent failure to agree a US/China deal carries significant implications as Iran tensions rise

Following the breakdown in US/China trade negotiations earlier this month, US and Chinese actions since then point in our view to a protracted period of tariffs. While Trump has placed additional tariffs on Chinese goods, China has allowed the renminbi to depreciate markedly since May 10. Furthermore, Trump’s announcement of restrictions on telecoms suppliers, aimed indirectly at Huawei, indicates the probability of a trade deal in the short-term is remote. We note forecast earnings momentum is easing again after improving earlier in the year and cyclical sector PMIs are under pressure. As tensions in respect of Iran continue to rise, it remains a good time to re-appraise risk levels in portfolios in our view.

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20 March 2018

Social Media’s Dieselgate?.

The risks include fines, increased regulation and a change in consumer preferences

The recent controversy over social media and the use of its user data is likely to persist. Many users may not understand that researchers can accurately profile individuals on something as simple as their Facebook “likes”. The potential for influencing in subtle ways both consumption and more controversially political behaviours through targeted advertising should be clear. Multiple investigations across jurisdictions may now cast a harsh light on business practices which may otherwise have continued under the radar. Global digital titans which have become in effect brokers of user data are therefore under threat on another front, in addition to a recently proposed digital revenue tax.

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24 April 2017

French Election: Is populism already passé?.

Relief rally follows 1st round vote which puts Le Pen against a moderate

If last year was the year investors were caught out by misleading polls, today’s market action suggests that investors are being caught out by mistrusting them. A collapse in near-term euro volatility, sharply higher equity markets and a compression in the spread between French and German government bonds emphasises the relief that Le Pen was not in a run-off with a far left-wing candidate.

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10 November 2016

Trump’s double surprise.

It is quite clear that in the days leading up to the U.S. Presidential election, both markets and surveys got it wrong. Traditional polling once again failed to spot the depth of support for radical political change. This was after all the U.S., which has delivered the strongest post-crisis economic performance of any developed nation. 

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31 October 2016

BOE leadership: Carney’s conundrum.

Mark Carney’s testimony to the UK’s House of Lords economic affairs committee was notable both in regard to his personal intentions and the future interaction between fiscal and monetary policy. In respect of the former, his emphasis on personal circumstances in terms of whether he wished to serve a full 8 year term at times felt uncomfortably close to sounding as if he wished to spend more time with his family. Even if this may have been unintentional it has contributed to the speculation over his future.

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10 August 2016

Gilt shortage: It takes two to tango.

Yesterday’s failure by the Bank of England fully cover its bond purchase order indicates that the re-introduction of QE has created a significant squeeze in the UK’s bond market.  This auction failure highlights a possible constraint on the BOE’s QE policy, at least until a more expansive fiscal policy delivers a significant increase in the future supply of gilts or substitute securities.

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RSS - Strategic Insight
Sector report cover
*Multiple Sectors
30/05/2019
Equity strategy and market outlook - May 2019

In this month’s strategy piece, Alastair notes that the much-anticipated resolution to the US/China trade dispute has failed to materialise. Furthermore, the likelihood of any resolution in the near term appears modest at best. His earlier more positive views on equities for 2019 were contingent on a US/China trade resolution by mid-year and his outlook has therefore become more cautious. A downward turn in survey data and consensus earnings forecasts has been re-established and ebbing global earnings momentum during the past four weeks consistent with softer PMI indices and slowing trade data. Short- and long-term bond yields have fallen in recent weeks, reflecting market expectations of a slowdown. A steady build-up of debt in the corporate sector of China and the US will become a greater issue if the economy slows. Therefore, he believes investors should now focus on balance sheet quality in equity investments at this point in the cycle. He moves to a cautious view on global equities from neutral. Given the still significant rally since the year-end, there is time to reposition portfolios and he believes investors should focus on specific companies with lower than average exposure to cyclical factors and trade headwinds, given the cautious outlook.

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