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23 March 2018

Market declines: US LIBOR or US trade war?.

Headlines scream trade war while a surge in US LIBOR is tightening US financial conditions

It is very easy to point the finger at US trade sanctions against China as a reason for the recent declines in equity markets. The prospect of a near-term confrontation, in respect of access to markets and IP protection (a free competition zone perhaps rather than a free trade area), is clearly unhelpful for global equity sentiment. China’s transition from a catch-up nation to an economic competitor always had to be resolved at some stage. However the second dynamic at work during Q1 18 is a rapid rise in US LIBOR, over and above that of official US interest rates. This is tightening monetary conditions rather faster than policymakers may have intended.

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11 August 2017

North Korea: A problem not of Trump’s making.

Missile development program slowly shifts the political balance

North Korea’s recent successful test of a missile capable of reaching much of the US mainland is clearly a concern but it is not because such an attack is imminent or likely. The history of military rocket development suggests that it will still be some years before North Korea could be assured of a successful, let alone multiple, strike on the US or even Guam. However, in the event of any attack, the overwhelming superiority of US forces would undoubtedly ensure the destruction of North Korea. Therefore in many respects Trump’s most aggressive comments this week were a statement of the obvious and investors should accordingly not over-react, even as volatility has risen during thin trading over the holiday season.

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RSS - Strategic Insight
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*Multiple Sectors
26/07/2018
Equity strategy and market outlook - July 2018

In this month’s strategy piece, Alastair George believes that global equity markets remain in a period of consolidation while US interest policy is normalised even as corporate performance remains strong. Furthermore, US bond yields still appear too low given the prospect of increased issuance, a reduction in the Fed’s balance sheet and strong US growth. In respect of the US trade war, we believe the recent comments on monetary policy and announcement of additional subsidies for US agriculture underscore the resolve and political incentive for the current US administration to maintain a confrontational stance with respect to China despite the positive recent EU/US announcement. We remain cautiously positioned on equities.

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