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”

Do shares always win in the long run?

It used to be a common belief of many managers that if you bought and held a portfolio of shares over any market cycle you would earn a decent return. This argument may be changing. The argument went that the sharp cycles in shares were based on shallower and shorter cycles for economies. They might … Continue reading “Do shares always win in the long run?”

The end of the beginning, not the beginning of the end

It is becoming clear that the global recovery from the COVID-19 recession began in May. Widespread, albeit still incomplete, success in slowing the spread of the virus has prompted most governments to begin easing lockdowns over recent weeks, following China’s earlier lead. That has led to broad-based improvements in business and consumer confidence, alternative indicators … Continue reading “The end of the beginning, not the beginning of the end”

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”

Plumbing the depths

Yesterday The Office of Budget Responsibility in the UK tried to update its forecasts for the UK economy. They emerged at the pessimistic end of the current range of estimates but attracted news coverage because of who they are. They anticipate on the scenario they published a fall of 35% in the UK second-quarter GDP, … Continue reading “Plumbing the depths”

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”

Brexit: what’s next? The crunch dates ahead and what investors expect

“Brexit day” is nearly upon us, but the saga is far from over. We look at the key dates to come and what investors think will be the outcome. The UK voted to leave the European Union by a margin of 52% to 48% in a referendum held on 23 June 2016. Since then, the … Continue reading “Brexit: what’s next? The crunch dates ahead and what investors expect”

Markets can get too exuberant

The recent all-time highs in the S&P 500 this week mean it has now hit more records this year than it did in 2018. There may even be more to come. However, it was at this time last year that an equity market sell-off gathered steam, with the usual “Santa Claus” rally failing to materialise. … Continue reading “Markets can get too exuberant”

UK economy rebounds to avoid recession

Unless the economy improves and a smooth Brexit is achieved, interest rates may be lowered.  The first release of UK GDP for the third quarter shows the economy avoided a technical recession. Real GDP growth was 0.3% quarter-on-quarter compared to -0.2% in the second quarter, although the latest figure did disappoint consensus expectations of 0.4%. … Continue reading “UK economy rebounds to avoid recession”

A look at equity markets in Japan and China

On a day when Wall Street has reached new all-time highs, there has been some favourable effects on equity markets around the world. The bulls are buying, hoping that there will be some modest trade deal soon between the US and China. Meanwhile, all can enjoy the benefits of low-interest rates and more money available … Continue reading “A look at equity markets in Japan and China”

Italy’s 66th government since WW2 looks set to fall

Trade continues to dominate the headlines with Donald Trump’s tweets around US tariffs driving sentiment. The emergence of China’s appetite to use its currency as a shock absorber also added volatility. August’s volumes are traditionally lighter and that helped catalyse a very weak start for US equities albeit a lot of the losses had been … Continue reading “Italy’s 66th government since WW2 looks set to fall”

Will the UK economy slip into recession?

Disappointing GDP data shows the UK economy contracted in the second quarter and raises the risk of the country entering a technical recession. The UK economy contracted by 0.2% in the second quarter, following 0.5% growth at the start of the year. What was behind the data? A sharp drop in manufacturing output (-2.3%) over … Continue reading “Will the UK economy slip into recession?”

Why a pick-up in UK growth may prove deceptive

Recent economic data from the UK has improved but signs are that this is due to stockpiling ahead of worries over potential Brexit disruption. Brexit continues to dominate news and politics in the UK. Even lowly economists pray for a break from the mundane gridlock and circular arguments. Now that the Brexit deadline has been … Continue reading “Why a pick-up in UK growth may prove deceptive”

Japan gets into party mood – how will markets respond?

Japan had been fighting deflation for years since the great crash of its banks and property market thirty years ago. An ageing population saves a lot. Population numbers are falling so GDP will not grow as quickly as in places like the US and UK where migration adds to the numbers. Companies are worried about … Continue reading “Japan gets into party mood – how will markets respond?”