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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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22 November 2016

Earnings revisions: Gap widens between U.S. equities and earnings forecasts.

Though the bullishness is palpable, U.S. equity markets are not being driven higher by 2017 earnings forecasts, which have declined during November. In the absence of upgrades, we would now question how far the slogan of “Make America Great Again” can push U.S. equities. In the UK, market indices appear better supported as earnings forecasts are still increasing, even as the stock market has lagged. In Europe, in euro terms both the market and estimates have remained stable over the last quarter.

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4 November 2016

BOE: Bank on track.

Today’s BOE decision represents a correction in UK policy makers’ thinking. The sudden stop in activity which was implied by the Bank’s August stimulus package has not materialised and the focus has instead returned to significantly above-target inflation by 2018. This is going to be supportive of sterling, especially as consensus views on the exchange rate had become so negative.

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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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17 October 2016

Sterling: Lower for longer as the EU strikes back.

The UK’s new Prime Minister Theresa May’s honeymoon period is clearly over. Days after emphasising the importance of national sovereignty and appearing to lean towards a ‘hard’ Brexit, a dawn raid on sterling and subsequent weakness has given opponents ammunition to attack the UK’s plan to leave the EU. Furthermore, tough talk from the UK government has been reciprocated from EU leaders and European heads of state. President of the European Council Donald Tusk may even have given the game away by linking the concept of a ‘hard’ Brexit to ‘no Brexit’. For sterling, we believe investors should look through the politics and focus on the economics.

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1 September 2016

UK economy and corporate profits: Refusing to follow forecasts.

Since July, there have been over 250 UK corporate earnings reports or trading statements, which we have been tracking for any sign of Brexit-related weakness. Within these corporate filings we can find little evidence, in either outlook statements or in managements’ referendum commentary, to suggest a slowdown in trading is underway.

On the contrary, over 80% of company earnings reports indicate that trading is in-line with earlier expectations. Furthermore, 16% of companies report that trading is ahead of expectations against only 3% reporting that trading has fallen below expectations. In addition, recent data on house prices and manufacturing surveys seem to confirm that fears of a Brexit-induced slowdown in the UK have proved overblown, over the summer at least.

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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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