Economic and Political Monthly Roundup
Kindly sponsored by Allianz
A collation of recent insights on markets and economies taken from the comments made by chairmen and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.
Roundup
It was a case of ‘wait and see’ as the US election drew nearer and a number of European states re-introduced restrictions in an effort to try and limit the damage from the pandemic’s second wave.
wdt_ID | Exchange rate | 10/31/2020 | Change on month % |
---|---|---|---|
1 | GBP / USD | 1.29 | 0.20 |
2 | USD / EUR | 0.86 | 0.60 |
3 | USD / JPY | 104.66 | -0.80 |
4 | USD / CHF | 0.92 | -0.40 |
5 | USD / CNY | 6.69 | -1.50 |
wdt_ID | Indicator | 10/31/2020 | Change on month % |
---|---|---|---|
1 | Oil (Brent) | 37.46 | -8.50 |
2 | Gold | 1,878.81 | -0.40 |
3 | US Tsy 10 yr yield | 0.87 | 27.70 |
4 | UK Gilt 10 yr yield | 0.26 | 14.40 |
5 | Bund 10 yr yield | -0.63 | 20.10 |
Global
Resilience outside the Americas and Europe
Ben Lofthouse, manager of Henderson International Income, looks at where the most pronounced positive activity has been in global equity income. He concludes that there are clear signs that we have suffered the worst and an improvement should be seen going forward.
UK
Recovery will be bumpy
Chelverton Growth’s manager, David Horner, says there is a feeling that, once a trade agreement with the EU is in place, there will be a release of pent-up demand.
Mercantile’s co-managers, Anthony Lynch and Guy Anderson, are fairly sanguine in their outlook, noting that economic lead indicators suggest an encouraging recovery.
Andrew Impey, chairman of JPMorgan Smaller Companies, reflects on the reasons why the recovery in UK markets has stalled. While plenty of uncertainty still permeates, Andrew says a chunk of this is priced-in.
Unemployment is likely to rise leading to more precautionary saving
Jupiter UK Growth’s manager, Richard Buxton, says that unemployment will rise and precautionary savings likewise. He expects the recovery from the suspension of economic activity will be a bumpy one, and that capacity will be lost or curtailed to match weaker demand.
Jonathan Brown & Robin West, managers of Invesco Perpetual UK Smaller Companies, note that a reduced level of consumer spending during the lockdown has, in aggregate, strengthened household finances. The managers do not expect the full scale of job losses to be fully apparent until the various national furlough schemes have ended.
Algorithmic trading has been adding fuel to market volatility
M. Foster, J. Harrison, and J. Dieppeof, managers of Investment Company, believe it is highly likely that extreme market volatility, driven by ever-increasing levels of algorithmic trading, will be a feature of markets until the pandemic is brought under some form of control.
Ken Wotton and Adam Khanbhai, managers of Strategic Equity Capital, note that the indiscriminate impact of the pandemic has started to flow through to the ‘real economy’ with a 20.4% fall in UK GDP in Q2. The managers also make that point that, whilst the current situation is uncomfortable, history has found that uncomfortable times are often good times to invest in equities.
Europe
The recently established European Recovery Fund is seen as potentially providing a major boost
Stefan Gries and Sam Vecht, managers of BlackRock Greater Europe, make a case for feeling more optimistic about their outlook for Europe than they have done in many years. The newly established European Recovery Fund is a key factor behind this. They believe that the EU could emerge from the crisis in a more unified state, arguably helped by Brexit.
Ollie Beckett, Rory Stokes and Julia Scheufler, managers of TR European Growth, are similarly upbeat in their assessment. In their view, the policy environment is as constructive for equities as it has been for some time.
The ‘green economy’ is benefiting from a growing awareness of the environment around us, which the pandemic reinforced
Jamie Ross, manager of Henderson EuroTrust, goes over a number of the structural changes that have emerged and been accelerated over the pandemic. Jamie also says that one of the less obvious impacts of this crisis will likely be a growing awareness of the environment around us, and the realisation that how we treat our environment is inextricably linked to our prospects in the future.
Asia Pacific
Returning US-listed Chinese companies is boosting Hong Kong
James Will, chairman of Asia Dragon, discusses why Asia’s appeal remains undimmed. He also highlights that, after social unrest and the pandemic unnerved investors in Honk Kong, the market is being bolstered by returning US-listed Chinese companies.
Nigel Cayzer, chairman of Aberdeen Standard Asia Focus, touches on India and Thailand, which have been hit harder than most. With respect to dividends, Nigel says that dividend yields in Asia appear more resilient than other regions.
Dividends in Asia have held up more resilient than other regions
Pacific Assets’s chairman, James Williams, notes that while East Asian countries seem to have fared better than elsewhere during the pandemic, the political backdrop also remains turbulent. James cites Chinese military activity in the South China Sea, the Himalayan border with India, and the imposition of the new Security Law on Hong Kong as factors that long-term investors could do without.
Other
We have also included comments on the flexible investment sector from JPMorgan Multi-Asset; North America from Jupiter US Smaller Companies; Japan from Schroder Japan Growth and Baillie Gifford Japan; the global emerging markets sector from JPMorgan Emerging Markets, Genesis Emerging Markets, and JPMorgan Global Emerging Markets Income. Vietnam from VinaCapital Vietnam Opportunity and VietNam Holding; Thailand from Aberdeen New Thai; debt sector funds from UK Mortgages and Secured Income Fund; private equity from ICG Enterprise; hedge funds from Gabelli Merger Plus+; infrastructure from Infrastructure India; UK property from Alternative Income REIT, PRS REIT, and Target Healthcare REIT; and global property from Ceiba and Macau Property Opportunities.
Full version
Click on the link at the bottom of the page to access the full report.
Kindly sponsored by Allianz
The legal bit
This note was prepared by Marten & Co (which is authorised and regulated by the Financial Conduct Authority).
This note is for information purposes only and is not intended to encourage the reader to deal in the security or securities mentioned within it.
Marten & Co is not authorised to give advice to retail clients. The note does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.
This note has been compiled from publicly available information. This note is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of this note is prohibited.
Accuracy of Content: Whilst Marten & Co uses reasonable efforts to obtain information from sources which we believe to be reliable and to ensure that the information in this note is up to date and accurate, we make no representation or warranty that the information contained in this note is accurate, reliable or complete. The information contained in this note is provided by Marten & Co for personal use and information purposes generally. You are solely liable for any use you may make of this information. The information is inherently subject to change without notice and may become outdated. You, therefore, should verify any information obtained from this note before you use it.
No Advice: Nothing contained in this note constitutes or should be construed to constitute investment, legal, tax or other advice.
No Representation or Warranty: No representation, warranty or guarantee of any kind, express or implied is given by Marten & Co in respect of any information contained on this note.
Exclusion of Liability: To the fullest extent allowed by law, Marten & Co shall not be liable for any direct or indirect losses, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note. In no circumstance shall Marten & Co and its employees have any liability for consequential or special damages.
Governing Law and Jurisdiction: These terms and conditions and all matters connected with them, are governed by the laws of England and Wales and shall be subject to the exclusive jurisdiction of the English courts. If you access this note from outside the UK, you are responsible for ensuring compliance with any local laws relating to access.
No information contained in this note shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction.
Investment Performance Information: Please remember that past performance is not necessarily a guide to the future and that the value of shares and the income from them can go down as well as up. Exchange rates may also cause the value of underlying overseas investments to go down as well as up. Marten & Co may write on companies that use gearing in a number of forms that can increase volatility and, in some cases, to a complete loss of an investment.