Yet another update on China
by Lorenzo La Posta, CFA — Portfolio Manager
— China is facing a different set of issues that still have global consequences
For some reason, any time it’s my turn to write our weekly Global Matters blog, there is something happening in China worth writing about. Or perhaps, it is just my colleagues deliberately leaving me with the honour of updating our readers on the latest developments within the Chinese walls (pun intended). Luckily, these days we are not short of significant news and while the west is struggling with rising rates and elevated inflation, China is facing a different set of issues that still have global consequences.
- Global equities fell 2.1% last week
- Early voting in the US midterm elections has begun, with Republicans expected to take control of the house and gain a slim minority in the Senate
- Brent crude rose by 2.9% over the week to $98.6 a barrel
- Gold rose by 2.3% to $1681.9 per ounce
Will the strong dollar continue to spook markets?
by Robert White, CFA — Portfolio Manager
— At times such as this it is important to remember that the global economy is cyclical
We are living in a dollar-dominated world, a fact most famously captured by John Connally, President Nixon’s Treasury Secretary, who once told a group of global finance ministers “the dollar is our currency, but it’s your problem”. Students of economic history will be aware of the disruption that a strong US dollar can cause, however, at times such as this it is important to remember that the global economy is cyclical, and such periods eventually do pass.
- Global equities returned 4% last week
- Developed markets saw positive returns whilst emerging markets were a mixed picture with China notably seeing a large decline
- Brent crude oil rose 2.4% last week to $95.7 a barrel
- Gold fell 0.8% last week to $1644.9 per ounce
(IL)Liquidity of Property
by Jackson Franks — Analyst
— Open-ended property funds are not the only way to gain direct exposure to the property market
As mentioned in my previous blogs I am an avid Watford football club supporter. Although there are some ups and (a lot more) downs, being a Watford supporter has had one positive outcome. It’s enabled me to cope with the ever-changing UK political situation. Since David Cameron resigned as Prime Minister in 2016, following the UK’s vote to leave the EU, there have been three UK Prime Ministers over the preceding six years, with the fourth set to be announced.
- Global equities rose by 3.6% last week
- Xi Jinping was declared as the Chinese Communist Party Chief for a third time as he further consolidated his grip on power. His third term as General Secretary will make him the longest ruling Chinese leader since Chairman Mao
- Brent crude rose by 2.0% over the week to $93.5 a barrel
- Gold rose by 0.8% to $1657.7 per ounce
The third quarter started with bond yields falling, equities in the midst of a sizeable rally, and a perception that increasing evidence of a slowdown in the US and Europe would lead to a relatively short tightening cycle and a more dovish Fed. It ended with an increasing probability of recession, yet the most hawkish Fed since the Volcker era, bond markets in disarray and equities at new lows for this cycle.
by Alex Harvey, CFA — Senior Portfolio Manager & Investment Strategist
— A modicum of value has come back into the UK bond market
Three weeks ago, I had just landed in Morocco and with impeccable timing, as I worked out how to use Agadir airport’s ATM, Sterling tanked on the back of the UK government’s now well pored over ‘mini-budget’. I found it mildly amusing that the ticker for the Sterling-Dirham currency pairing is GBPMAD. It certainly felt like it! Of course, this wasn’t a bout of Dirham strength but a Sterling maelstrom resulting from the aforementioned budget, and the Pound was in freefall against every major currency.
- Global equities fell by 1.7% last week
- The International Monetary Fund released their latest round of economic projections leaving their 2022 global growth forecast at +3.2%, but downgrading 2023 to +2.7%
- Brent crude fell by 6.4% over the week to $91.6 a barrel
- Gold fell by 3.0% to $1644.47 per ounce
Welcome to the New Age
by Matt Connor — Investment Analyst
— The recent explosion of TikTok has made brands rethink their advertising strategies
Like it or not, there is no doubt that social media is now an integral part of our lives, with our online presence an extension of who we are, and for many, who they aspire to be.
There were almost three billion monthly active users on Facebook in the second quarter of this year, some 37% of the global population. For a business, social media offers a treasure trove of potential customers, but still so many seem to get it wrong when advertising through these channels.
- Global equities returned 1.7% last week
- World indices and commodities saw positive returns
- Brent crude rose 11% last week to $97.9 a barrel after The Organization of the Petroleum Exporting Countries Plus announced a two million-barrel per day cut in target production
- Gold rose 2.1% to 1694.8 per ounce
Data, data everywhere and not a number to guide
by Richard Parfect
— Humans like to have a number to hold onto as it feels tangible and brings confidence
All through life our brains like to use “general rules of thumb” when dealing with problems. These rules may come through personal experience or maybe they are more prescriptive and laid down by doctrine.
When dealing with problems I have sometimes found it useful to use a “factor of three”. For example, if I plan to do a DIY job in the house, bitter experience tells me it will take three times as long as I might expect. Such a guide can help avoid the shock of under-estimation of an outcome.
- Global equities fell 2.6% last week
- The UK’s ‘mini’ budget continued to cause carnage across financial markets. The International Monetary Fund urged the government to change the course of action
- Brent crude rose 2.1% over the week to $87.96 a barrel
- Gold rose 1.0% to $1660.61 per ounce
Calm before the storm
by Mark Wright, CFA
— We now find ourselves in the eye of an inflationary storm
Not long back from my first holiday abroad since the pandemic, I was looking out my window longing to be back swimming in the warm Mediterranean ocean off the East coast of Mallorca. I will spare you the details of the travel chaos we experienced both ways, it was a lesson learned!
I was expecting 10 days of sun and nothing much else weatherwise, but it didn’t quite turn out like that. We were fortunate enough to witness not just one but two thunderstorms. I say fortunate because they served as a healthy reminder that it is always calm before the storm.
- Global equities fell by 5.1% last week
- The past week saw 500bps of global rate hikes across 15 central banks including The Federal Reserve and the Bank of England
- Brent crude fell by 5.7% over the week to $86.15 a barrel
- Gold fell by 1.9% to $1643.9 per ounce
The rally in equity markets that started in mid June continued into the first half of August, taking Wall Street 17% off its June low, but was ultimately overwhelmed by the global energy crisis and extraordinary falls in bond markets through the month, reversing most of the gains of the previous two months. The biggest falls came in Europe, and most extreme was the UK, where yields on 2-year government bonds rose by 130bps, taking the yield to 3.0% at month end, the highest for 15 years. The UK 10-year yield also rose dramatically, up by 94bps to 2.8%. Eurozone bond markets fared only slightly better, with the German 2-year yield up by 93bps to 1.19% and the 10-year up 73bps to 1.54% over the month.
The Law of Lindy
by Tom Delic
— Often the most successful new businesses are centred around ideas that satisfy age-old basic human wants and needs.
In 1964, American author and academic Albert Goldman wrote an article in US magazine The New Republic, titled ‘Lindy’s Law’. While dining at Lindy’s, a New York delicatessen, Goldman became interested in the discussions that took place between entertainment industry veterans who frequented the restaurant and would analyse the latest televised comedy shows. While the Lindy effect is a useful heuristic to apply across many aspects of our lives, we can also use it as a filter in the portfolios we manage for clients.
- Global equities fell by 3.3% last week
- Commission President Von der Leyner is considering various measures to deal with the current cost of living turmoil
- Brent crude fell by 7.9% over the week to $93.0 a barrel
- Gold fell by 1.5% to $1712.2 per ounce