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