Latest economic, market and investment news

There’s a difference between expensive and bubble

Quarterly Investment Outlook – Q4 2024

The global economy is entering a more synchronized part of the cycle, but economies diverge.

Why the UK’s Autumn Budget is a global litmus test

The three things investors should know this week:

US Election - Less analysis, more popcorn please

The argument here is very simple: it may not matter who holds power today, over the longer term. We assign an era to a person (i.e. the ‘Obama Era’) but that person may not be as responsible as we think for economic outcomes. Presently, we are faced with a coin-toss election in the US.

The aftermath of the Fed’s rate cut

Do as the teacher says, not as the teacher does, an old saying goes. The exact opposite of that should apply to keeping up with the Federal Reserve. We have reached a point where we need to monitor the Fed’s actions ex-post, much more so than the narrative and justification for those actions or any comment about future intentions.

The Fed cut rates aggressively - Now what?

The US Federal Reserve came under severe criticism in 2022 for underestimating inflation and allowing it to run off. While there were externalities linked to price hikes (the war in Ukraine), the US Central Bank was widely panned for its certainty that inflation was “transitory”. It thus set a very hawkish course for interest rates that bond markets especially were not ready for, causing the sharpest...

The cuts are coming! But how many and how fast?

In Business School, they tell you about accounting, business valuations, business strategy, interest rate theory, asset management, economics, currency parities, valuing options, alpha, beta, delta, theta and so, so much more. What they don’t tell you is that real portfolio management largely consists of following and dissecting the word of central bankers. ‘Don’t Fight The Fed’ is a time-tested principle,...

Nvidia has us talking in derivatives

When financial professionals discuss derivatives, they usually talk about futures, swaps, and options. However, Nivida’s price falling 7% after posting second-quarter results that were ahead of consensus estimates seems to have the markets talking in derivatives, in a very different way.

The winter (?) of our discontent

Money management is less about managing returns, which one can’t really control, and more about managing risks. The manager who underestimates risks can be caught off-guard when they spike. The manager who overestimates them can leave a lot of money on the table, to the dismay of their clients.

An American Rate Bottleneck

Jackson Hole, Wyoming, is a valley in North America, wholly unremarkable in history for anything other than it was named by someone called Jackson who caught beavers. Yet once a year, when the US Federal Reserve meets there, the eyes of the economic and investment world are fixed on this tiny area in the Rocky Mountains.

Dissecting the market correction

In the last three weeks, global stocks have sold off, wiping out nearly $3tn or -4.5% of their global capitalisation, while global bonds have gained +3.5% by the close of Friday 2 August. Just this morning, Japanese stocks (which trade between 24:00 and 06:00 in UK hours) fell by -12.4%, the worst single-day drop since 1987.

Bank of England cuts interest rates since 2020

As expected, the Bank of England (BOE) has cut interest rates by 0.25%. This is the first rate cut in more than four years and it appears that the Bank of England is finally prioritising growth over inflation.

This world is getting more volatile

John Buchan (1875-1940), First Baron Tweedsmuir, author of “The Thirty-Nine Steps” and General Governor of Canada once said: ''You think that a wall as solid as the earth separates civilization from barbarism. I tell you the division is a thread, a sheet of glass. A touch here, a push there and you bring back the reign of Saturn.''

Quarterly Investment Outlook – Q3 2024

The global economy slowed down somewhat in the first half of the year, as rate hikes in the previous months moderated demand. However, growth rates are still mostly positive, without major recessions.

The centre hangs on & inflation is only moderating

The world looks like a better place in the last few weeks. In France, Mr Macron managed to hand an electoral loss to surging Ms Le Pen. In the UK, the people decided overwhelmingly to install a moderate government with a strong mandate and possibly a more favourable eye towards Europe, after years of convulsions and five Prime Ministers, in the formerly ruling Tory party.

"It's still the economy, stupid"

An exhausting two political weeks came to an end. The result was the return of Labour to Number 10 after fourteen years, an uncertain and shaky coalition in the French National Assembly, and an even shakier candidacy by President Joe Biden.

What markets and businesses now expect from Labour

Elections often hold surprises. However, this UK general election did not. Rarely has a landslide victory for one party been so thoroughly predicted across political pundits and financial markets. As predicted, Labour won a significant majority, roughly 170 seats at the time of writing. Conservatives survived as the opposition party, and Liberal Democrats picked up a significant number of votes,...

The US consumer

There is a maxim I have learnt after a few hits in recent years: "Never underestimate the hedonism of the US consumer".

Why politics haven’t panicked markets

‘There are no dead ends in democracy’, a popular quote says. The democratic processes in at least 3 G7 countries are certainly grabbing all the attention.

Three questions for asset allocators

One of the oldest tricks in real estate is comparison. If a real estate agent has an apartment they really want to push, they will never show it outright. Instead, they will show a client - a couple of bad apartments before that. Exasperated from the rounds and disappointed, the client is more likely to agree to the apartment the agent wanted to promote in the first place.

Sustainable investing

Sustainable investing has to be about aligning your money with your values, not outperforming the market.

Inflation remains the market’s main act

The UK will join the US this week in reporting inflation data, while the Bank of England’s interest rate decision is set to follow soon after. Retail sales data will also be released for UK and US, which will provide additional insight into the situation of consumer spending.

What election result are investors hoping for?

The UK is one of those rare countries that enjoys a G7 status, boasts an important economy, the global language, and is home to one of the world’s largest financial centres. Many of the worlds important investors are graduates of British universities. In what is possibly a perversion of history, this fourth of July the world’s uninterrupted attention will be on Britain.

If the economy is doing better

Global stocks and bonds rallied last week, on the back of slightly lower inflation and a string of relatively disappointing news for the US economy, which caused traders to increase their bets that the Fed could cut rates twice by the end of the year.

Adding Duration in light of inflation

When the US CPI print came in for March at 3.5% it confirmed a trend of three consecutive US inflation numbers coming in above expectations.

We need to talk about emerging markets

A whole generation of investors who started their careers in the post-Global Financial Crisis (GFC) period have only experienced returns for emerging market (EM) equities which look like this:

Bond investors are sitting on a loss after 5 years

One of the most frustrating things as a financial professional over the years, is the association of the term “markets” mostly with equities. “Global markets rebound”, mostly means “global stocks rebound”. “Global markets in trouble”, usually refers to an equity rout.

New CIO Ben Seager-Scott's first thoughts

With the arrival of our new Chief Investment Officer, Ben Seager-Scott, Chief Economist, George Lagarias, asked Ben some questions on our portfolios and the future of investing.

The tech rally and its perils

Since the beginning of the pandemic, global stock markets have gained +48%. At the same time, the US stock market has increased its capitalisation by 69%, led by the tech sector which more than doubled in value, gaining 134%. Those numbers come against a backdrop of lockdowns, trade wars, broken supply chains, below-trend economic growth, high inflation and fairly restrictive monetary policy. Ex-technology,...

Quarterly Investment Outlook – Q2 2024

Global equity markets entered 2024 with significant momentum from the last two months of 2023 fueled by falling inflation and hopes of lower interest rates during the year. Despite a fast reduction of rate cut expectations in 2024, from 7 to 2 (and even possibly none) in the US, and persistent Quantitative Tightening, equities carried the momentum forward, gaining 7.5%, a full year’s return on the...

What’s the impact of the Fed’s 'Higher for Longer'

Of ancient soothsayers, Pythia, the high priestess of Apollo at Delphi, was considered the most reliable. Why? Because she was clever. She understood forecasting to be a dangerous business.

Should we fear the correction?

William of Ockham was a fourteenth-century English Franciscan friar. As an unusually clever person, he wasn’t very much liked by either the church (for insisting on inserting logic into theological discussions) or by the Pope himself.

Weekly market update - Jenkins' Ear

In March 1738, a British mariner Robert Jenkins was ordered to testify in front of Parliament. He presented MPs with an unusually gruesome item: his decomposing ear. Seven years before, the ear had been severed by a Spanish officer off the coast of Florida. Parliament had had enough and voted to wage an outlandish war on Spain… over Jenkins’ ear. Eventually, the conflict merged with the 1742 War of...

The US government’s poison pill

A ‘poison pill' is a corporate tactic where companies resisting a hostile takeover somehow dilute shareholder worth. A common tactic is to take on large debt to make the company unattractive and scare the corporate raiders away.

Weekly Market Update: Would you stand in a bull ring? It comes down to your benchmark

In 2016, Ricardo Torres Martinez, a teacher, took his students to a farm in Apodaca, Mexico. He lined them up in rows in the Bull Ring and told them to sit absolutely still. Then he let the bull loose. Incredibly, the bull ran back and forth between the students, but, incredibly, no one was hurt. “The animal doesn’t attack. It just wants to be safe”.

The Osgood Market & the slow fuse of the UK budget

Coming off the heels of Oscar night (Oppenheimer cleaned up and Robert Downey Jr. finally got a long-overdue Academy Award), I look at markets, and I am reminded of the final scene of Billy Wilder’s “Some Like it Hot” (1959).

How China is reducing inflation

Last week’s Core Personal Expenditure number, the Fed’s preferred gauge of inflation, continued to fall, down to 2.8% for the year.

The magnificent… data centres

Since the dawn of time, human beings have been nothing but tool users and toolmakers. Our insatiable hunger for the next thing always drives change. At some point in the early twentieth century, growth became exponential. It took us a little less than 400,000 years to learn to use the wheel. Yet we went from using gas lamps to exploring space in three generations. From there to global connectivity,...

The equity rally and the perilous promises of AI

Last week, I penned an article saying, “This equity rally has no (visible) legs”. Earnings are ok, but nothing to write home about. Rates by the end of the year will likely end up higher than what was priced in by the end of December, a theme which is playing out.

Managing your wealth during times of volatility

February 2024. Following three months of positive asset returns, many concerns which plagued individual investors in 2024 have fallen away.

What will businesses build with AI Language Models

February 2024. Mentions of AI and Artificial Intelligence on company earnings reports have skyrocketed over the last year. Ever since the release of OpenAI’s ChatGPT site, which is based on the GPT-3.5 and GPT-4 Large Language Models (LLMs), companies have wanted to claim that they are using AI, and are part of the AI revolution. The reality is very few will have the ability to develop AI models by...

The Bull Market has yet to show us its legs

The worst bull markets are by far the 'quiet ones'. A period of time when the index rises little by little per day, without any major breakouts and in the absence of a clear narrative. The less investors are convinced, the more excuses why it can’t last, the more persistent the rally gets. This isn’t karma. It’s about flows. The more money stays on the sidelines, the more money will go into markets...

Weekly market update – This is a Good (US) Economy

90%. That’s the aggregate probability of a developed market recession this time last year by professional forecasters – yours truly humbly included. Economists often mock Wall Street by saying that it has ‘predicted' nine of the last five recessions. Or the International Monetary Fund (IMF), which hosts a top-line economic think-tank, and central banks all of whom last year saw economic difficulties...

Does the UK have a debt problem?

“Countries don’t go bust”, Walter Wriston, Citibank’s president (1967-1984) famously said. Debt defaults are a complex political and social calculation and when they do happen, it is way before a country runs out of natural resources. Yet, of all the economic risks in the next few years, none may be as consequential as the accumulation of debt.

Quarterly Investment Outlook - Q1 2024

Global equity and bond markets enter 2024 with significant momentum from the last two months of 2023 fuelled by falling inflation and subsequent dovish projections from the US Federal Reserve.

Why the rate debate is a moot point

After the Fed’s Dot Plot surprise in December, markets moved fast to price in several rate cuts in 2024. Perhaps a bit too fast? The jury is still out, with the debate raging as to whether the US Federal Reserve will lower interest rates as fast as the markets anticipate (six times this year) or less. I feel compelled to state three obvious points.

Weekly market update – Runaway Bulls?

2023 was a slow and frustrating recovery train until late October, which then turned into a hypersonic rocket. What looked like a sub-par 2023 turned out to be a blowout in the last two months, in line with the kind of performance we expect following a bad year (2022).

Weekly market update – Did the Fed change course?

Did the Fed change course? The Market may be asking the wrong question.

2024 market forecast

December 2023. Given the stock and bond market volatility, it’s hard to know what the starting point for equity valuations and rates as we enter 2024. At the beginning of the year, we said that volatility and geopolitical uncertainty will persist. Stocks and bonds were nearly flat by the end of October and are now up 10% and 5% respectively in just thirty days.

UK consumer outlook December 2023

December 2023. Consumption is a key component of any modern society. It accounts for over 65% of GDP and is one of the most important indicators for assessing the health of an economy, with fluctuations in consumer confidence being a key indicator for predicting the speed of a recovery or the depth of a recession.

Weekly market update - 6 Key Risks for 2024

When we talk about risks, by definition we mean events or developments outside our base scenarios. The following risks are not, thus, our prediction of what will likely happen in 2024. Instead, we focus on how certain areas of politics and the economy may develop adversely enough to disrupt the base-case scenario and lead to different outcomes.

Death & Taxes: It takes a village to retain wealth

Stock markets continue to rally, performing their usual Christmas song-and-dance aided, presumably, by the tailwinds of more bullish projections around interest rates. A balanced portfolio performance is, as of this morning, roughly in line with what is expected after a bad year.

Shifting stock-bond returns correlations

The correlation between stock and bond returns is a crucial element of asset allocation decisions. When stocks and bonds move in opposite directions, holding both can help reduce portfolio volatility. When they move together, diversification is less effective. Understanding this correlation helps investors build balanced and resilient portfolios.

Renewable energy stocks have been hit hard

November 2023. Despite growing calls for a global shift to clean energy, stocks in the sector are significantly underperforming the broader market. In fact, they're some of the worst performers this year.

How markets could dictate the Statement's outcome

On 22 November, the Chancellor will be walking the usual tightrope between delivering as much government spending as possible while preserving the state of the nation’s coffers but the constraints that he faces are unusually challenging.

Weekly market update – Are rate cuts on the way?

Our Weekly Market update from our Chief Economist, George Lagarias, said: “Stocks have somewhat corrected, and futures traders have very short positions in bonds. There are now many scenarios in which one (or both) of these asset classes stage a rebound… and we should not write off 2023 just yet. September and October are historically the worst months of the year by far. This means that regardless...

Quarterly investment outlook - Q4 2023

Global equities had a volatile quarter, failing to find much conviction and ending down over -2%, albeit broadly flat in Sterling terms given a newfound weakness in the Pound. Bonds also struggled as interest rate expectations continued to grind higher. Index-linked gilts in particular sold off due to their longer maturity profile. Gold was flat for the period, while the cost of oil crept back towards...

The age of debt

“Neither a borrower nor a lender be, for loan both loses itself and friend. And borrowing dulls the edge of husbandry”, says Polonius in Hamlet.

Global and UK economy - Q4 2023

After 18 months of uninterrupted interest rate hikes, most central banks in the developed world have reached or are very close to their interest rate peaks.

What the yield curve is telling us right now

October 2023. The US yield curve is now back in the spotlight, with a big deal made of “bear steepeners” and “disinversions”. But what exactly do these terms mean, and how will they affect markets?

What’s happening with the Chinese economy?

October 2023. If you have been reading the economic news over the summer months, you may have noticed that the Chinese economy has been a focus of the financial press. The Economist devoted two covers to this issue while the FT and the WSJ dedicate many long columns to the Asian economy.

Asset prices and the economy - where are we headed

October 2023. Making investment decisions is sometimes more of an art than a science, and the mere existence of the Efficient Market Hypothesis tells us that trying to predict market movements is, at the very least, notoriously challenging.

The importance of long-term investing

October 2023. When it comes to our emotions, we can honestly say that sometimes they make us a bit irrational, meaning we are more likely to make biased decisions.

How investors’ biases affect investment decisions

October 2023. The Efficient Market Hypothesis (EMH) is an investment theory that states that current stock prices reflect all existing available information, making them fairly valued at any given time.

Macroeconomic backdrop 

September 2023. The number of bankruptcy filings is on the rise, and that may be a good thing.

Demographics, debt and interest rates

September 2023. A ‘common knowledge’ view I find very interesting is that Japanese interest rates have been so low for so long due to low growth, which has largely been attributed to the country’s demographics.

What a Fed pause means for investors

September 2023. When will the Fed pause? This is the million-dollar question.

Quarterly investment outlook – Q3 2023

Despite higher interest rates and persistent (though falling) inflation, global equity markets continued to err on the side of optimism as consumer spending remained strong and company earnings were better than expected. Global equities returned over 6.5% during the second quarter of the year, albeit for unhedged UK-based investors this was tempered by a stronger Pound meaning returns closer to 3%....

Is Private Equity about to implode?

Every crisis has a response. In their effort to prevent it from happening again, policymakers put in safeguards and provide incentives for the next bull market. In these policies, we should, usually, seek the seeds of the next crisis. From the biggest potential risks, the Private Equity space is where we would focus.

The age of policy divergence

After the fall of the Soviet Union, the world breathed a profound sigh of relief. Humanity had come close to self-annihilation in 1962, when the US and the Soviet Union threatened to deploy their nuclear arsenal on one another, destroying life on the planet in exchange for control of Cuban airspace.

The global investment outlook - Q3 2023

Global investment risks remain elevated as tight monetary conditions and policy uncertainty cause shocks in several markets. We saw a rally in risk assets during Q2, but this rally was largely concentrated in a few US tech stocks, a rebound after a bad year combined with optimism surrounding AI.

Quarterly economic outlook - Q3 2023

The global economy got a welcome and non-inflationary boost from China’s post-Covid reopening early in the year. However, from this point forward, it is poised to slow down. Credit conditions are set to deteriorate, disposable incomes reduced as inflation remains potent and central banks keep reducing the supply of money.

The next big commercial real estate crisis

July 2023. Last month, HSBC announced that it would be moving from its iconic tower in Canary Wharf to a smaller building in the city, very close to our Mazars’ office in fact.

Emerging markets, a mixed bag

July 2023. The first quarter of 2023 started strong for emerging markets. Globally, investors were excited of the prospect of the Chinese consumer returning to a long period of strict lockdowns.

Has the demand for oil finally peaked?

July 2023. With the popularity of electric vehicles and other cleaner technologies on the rise, the demand for oil is set to slow over the next decade.

Shadow banking and the risk to banks

June 2023. The last nine months have seen two widely publicised crises with something in common. The first, the liability driven investment (LDI) crisis which saw the Bank of England intervene to prevent the collapse of pension funds, the second the collapse of Silicon Valley Bank, which was forced to sell down its investments at a loss to meet deposit withdrawals.

Rational policy making: could it get any lower?

June 2023. As markets celebrate Congress’ decision not to self-immolate, investors reflect on how low the bar for rational behaviour by policymakers is, and whether risk premiums echo the present political and geopolitical tectonic shifts.

Is Europe losing its factories?

June 2023. It all started with an energy crisis. Swathes of European factories were forced to limit production as rampant energy costs hampered their business models. But is this a one-off or has this initiated a long-term industry exodus as manufacturing industries in foreign nations become increasingly competitive?

Is post-Brexit London doomed?

June 2023. Post-Brexit London has lost some of its curb appeal, with many now preferring the likes of Amsterdam and Paris to base their headquarters. However, recently a large bulk of asset transfers has been completed. At the same time, relations between the UK and the EU seem to be improving, creating an easier path for post-Brexit financial services exports.

The US debt ceiling

May 2023. Crises in financial markets are mostly unpredictable and the result of a misunderstanding of risks and genuine mistakes. We could however be headed for a major crisis which is completely avoidable, save for the deep political polarisation in the US and some of the arcane laws in place regarding how much debt the country has outstanding.

The 60/40 portfolio

May 2023. The 60/40 portfolio consists of 60% equities and 40% bonds. Equities provide capital appreciation but with volatility. Bonds provide lower, predictable returns and are less volatile. In fact, the equity/bond split is then adjusted for individuals’ risk tolerance, but the term 60/40 portfolio is a catch-all which represents all diversified portfolios. This bond equity split has traditionally...

Timing the recession

May 2023. A potential US recession has been a topic of heated debate among investors. But exactly which recession indicators are the most reliable?

De-dollarization

May 2023. In Pirates of the Caribbean, Jack Sparrow often trades in, or searches for, treasure in the form of pieces of eight. Pieces of eight were introduced in popular pirate lore by Robert Lewis Stevenson’s Treasure Island.

Is it time for Alternatives?

May 2023. The world of finance has three traditional asset classes: Bonds, stocks and commodities. The market for the latter has always been the smallest, as they usually trade in forward or futures contracts.

When will UK inflation come down?

May 2023. Rising UK inflation is a result of global supply chain disruptions. However, as supply pressures and price hikes ease elsewhere, UK numbers still seem stubbornly resilient. One of the reasons is the labour market, which is much tighter in the UK. The question is: When will UK inflation drop?

Looming risks for investors

May 2023. For the fourth year in a row, we are faced with great uncertainty and a wide variety of outcomes.

Investing money during volatile times

May 2023. To date, our theme for 2023 is that the world is a volatile and unpredictable place. This could have been our theme every year since 2006 and we would have still hit the mark. But this is not garden-variety volatility. Underlying everything are two themes. A geopolitical shift away from the post-soviet unipolar world, and the war against all that is not sustainable.

How will generative AI affect the global economy?

May 2023. Despite the potential for new technologies to disrupt industries and livelihoods, they could also be the key to unlocking the productivity growth we need to boost income and living standards.

Apple takes on the banking industry

May 2023. The Apple Card, a joint venture between Apple and Goldman Sachs, now offers a savings account delivering an attractive interest rate of 4.15%. But is this the beginning of a revolution in banking, or simply an ill-fated attempt by Apple to diversify its revenue base?

Five EU nations announce a ban on Ukrainian grain

May 2023. Five Eastern European nations recently announced bans on grain and other food imports from Ukraine, citing their desire to protect their respective agricultural sectors.

After SVB and Credit Suisse, what’s next?

April 2023. Smaller banks are still feeling the pressure, while bigger banks feel safer. The alarm bells are off, for now. But investors should not be relaxed about building risks.

China’s reopening – Global inflation & growth

April 2023. Chinese economic data, for the first couple of months of the year, suggests that GDP growth will exceed 5% this year. But this time seems to be different.

Are private assets under threat?

April 2023. Private assets appear to offer less volatility than those publicly traded and valuations in this space have been much more resilient than listed equities. However, no asset can escape its fate forever and recent liquidity issues may bring about a reckoning for private assets.

Why is UK inflation so high?

April 2023. The global rise in inflation began in mid-2021 as economies re-opened following the COVID pandemic. Damaged supply chains were the prime issue, as well as China’s continued zero-COVID policy since the country’s cheap exports had been a prime deflationary factor in recent decades. Inflation was turbo-charged in February last year as Russia’s invasion of Ukraine caused energy prices to skyrocket.

Future of Commercial Real Estate

April 2023. Commercial Real Estate (CRE) – an illiquid asset class that rarely sees the spotlight. Yet, the well-publicised failures of Silicon Valley Bank (SVB) and Credit Suisse have reignited investor concerns around balance sheets and, consequently, the loans made by banks to owners of commercial property to keep their businesses operating smoothly.

Global consumer resilience vs a global recession

April 2023. Even with persistent inflation and lingering economic fears, U.S. consumers (in particular) have surprised many with their desire to spend. This unexpected consumer resilience is helping to push the chance of an economic slowdown further away.

How will AI change finance?

April 2023. March was a huge month for developments in artificial intelligence (AI). GPT-4’s impressive performance on coding tasks and standardized exams raised many questions about what jobs would be automated. In finance at least, we believe that humans plus AI will beat AI.

Quarterly economic outlook - Q2 2023

The global economy remains unbalanced as the pandemic disrupts global trade, supply chains and international relations. As a result, individual economies diverge and data is unpredictable and volatile.

Quarterly investment outlook - Q2 2023

Positivity in equity markets continued during the first quarter of 2023, with global equities returning over 7.5%. As was the case in the final quarter of 2022, a stronger Pound meant that for unhedged Sterling based investors’ returns were somewhat diluted, albeit still significantly positive.

Quarterly investment outlook - Q1 2023

The last quarter of the year saw some relief for investors who had been hit from all sides throughout 2022 as markets rallied on the belief that the economy was perhaps showing enough signs of stress to persuade central banks to consider slowing and then stopping interest rate rises. Central banks, for their part, remain consistent in their messaging that markets may be overoptimistic.