Covid-19 and the Japanese model

The Japanese economy was in recession when the virus struck. GDP fell 1.8% in the fourth quarter of 2019 and experienced a further small fall in quarter 1 2020. Japan’s decline of 7.9% in the second quarter was a large fall by historic standards but was at the lower end of declines worldwide as economies … Continue reading “Covid-19 and the Japanese model”

Riding the central bank stimulus

The major issues today are how fast the recovery will be, how widespread will it be, and how much permanent damage will remain. Bulls in the stock market are excited by the recovery cycle. It now looks as if all the major economies have passed the worst of their troughs in output and incomes brought … Continue reading “Riding the central bank stimulus”

Looking back at the markets through July

A selection of articles looking back through the markets last month. Global Market Review  The other “R” number … Recession Early in July, investors were buoyed by news of progress in the development of coronavirus vaccines. However, as the month continued, optimism was tempered by a surge in infection rates in countries including the US, … Continue reading “Looking back at the markets through July”

The performance of world markets in the pandemic

Equity-market performance around the world has diverged in response to government stimulus measures and those exposed to the digital revolution. At the end of July, the S&P 500 index of larger US company shares pushed ahead of its starting level this year. Nasdaq powered on, forming more new highs. It has now delivered a 22% … Continue reading “The performance of world markets in the pandemic”

Central banks continue to prop-up markets

The tsunami of money has been unprecedented and is the main reason equity markets have performed as they have. The stimulus measures have been at their largest in the US, where money growth has shot up to 25% for the year. In the Eurozone and the UK, it is a lively but more modest 10%. … Continue reading “Central banks continue to prop-up markets”

Asia after the storm

The world has been battered by the coronavirus pandemic this year. Most economic activity was suspended as many of us spent our days confined to our homes. The Asia Pacific region will not escape unscathed. Decades of globalisation ensures that we are all in this together, regardless of where one lives, and whether one likes … Continue reading “Asia after the storm”

Keep calm and carry on

An unexpected global pandemic has triggered the third bear market of the 21st century. At the start of the year, equity analysts had priced in profits growth of 5-10% a year, now they are downgrading their profits estimates by 5-10% a week. One of the deepest economic recessions since the 1930s will expose some well-known … Continue reading “Keep calm and carry on”

The moral hazard of crisis intervention

US markets closed up 12% in the shortened pre-Easter week as new coronavirus case growth fell globally and an undercurrent of monetary and fiscal support helped keep sentiment buoyant. Many global markets have now entered ‘bull market’ territory. Nonetheless, European markets remain 20-25% off their 01 January levels, so you’d be forgiven for not feeling … Continue reading “The moral hazard of crisis intervention”

How long a shutdown can governments afford?

If a return to work is organised after the three-month stage, there will be some rebound, but economies will not spring back into full output immediately. The Central Banks have responded quickly and with great force to the crisis. Led by the Fed they have produced huge amounts of cash to keep markets afloat, rescuing … Continue reading “How long a shutdown can governments afford?”

US Senate reaches agreement to a $2 trillion fiscal stimulus package

As expected, the US Senate reached agreement between the parties to a $2 trillion fiscal stimulus package yesterday, which gave the markets a big boost. Democrats allowed substantial funds to be available for business through a $500bn fund for industries, cities and states, with a $367bn loan programme for small business. They also accepted the … Continue reading “US Senate reaches agreement to a $2 trillion fiscal stimulus package”

Covid-19: Three economic scenarios

Markets are governed by the duration and impact of the many measures being taken to limit and reduce the number of people contracting the COVID-19 virus. This was the week when the western advanced world changed dramatically, with the governments deciding to ban or advise against all events, tourism, entertainment and hospitality outside the home. … Continue reading “Covid-19: Three economic scenarios”

Coronavirus: assessing the risks

The novel coronavirus (COVID-19) that emerged in China’s Hubei province late last year has now spread to more than 50 countries. The outbreaks in Japan, Korea and Italy are particularly serious, but the number of cases is climbing rapidly elsewhere. Initially, the stock market’s reaction to the virus was muted. Most investors appeared to believe … Continue reading “Coronavirus: assessing the risks”

The virus sickens stock markets

As we feared last week, the reality of Chinese closures, damaged supply chains and worried consumers has hit world equity markets. The wall of money central banks have been injecting led people to anticipate a short, sharp decline and recovery which they could look through whilst driving shares higher. Suddenly, investors show concern that the … Continue reading “The virus sickens stock markets”

Why is the current market vulnerable?

Sharp falls in equity markets are never pleasant for investors, but the recent market weakness needs to be viewed in context of last year’s market environment, where we saw one of the strongest rallies in global equities in recent times. To illustrate, the US stock market (S&P 500) returned 31.5% in US Dollar terms last … Continue reading “Why is the current market vulnerable?”

A wall of money battles the virus

Some investment commentators had been relaxed about the Chinese virus, reading into the official numbers the idea that new cases had peaked. The Fed, the Bank of Japan, the European Central Bank and the People’s Bank of China are all running supportive policies, putting money into markets in various ways. As this money helped drive … Continue reading “A wall of money battles the virus”