Interesting Articles

The United Nations Secretary General António Guterres has just proclaimed a “code red for humanity.” A landmark climate change report from the UN’s Intergovernmental Panel on Climate Change (IPCC) warns that Earth will warm by 1.5°C without drastic large-scale emissions reductions. The past decade was hotter than any period in the last 125 000 years, and carbon dioxide (CO2) levels are at their highest in two million years. Achieving viable targets requires the whole world to be at net-zero by 2050, and the UN warns that its findings should be a “death knell for coal and fossil fuels”. Coal-fired power stations contribute to global warming through CO2 emissions, but they also produce sulphates, which (while poisonous) the IPCC estimates actually reduce global warming by up to 0.5°C. While the transition to green power is a must, the real win is in reducing overall energy intensity. World energy usage per unit of GDP has consistently fallen over the last 25 years and is forecast to continue falling. Read more >>
Global bond yields plunged in July on the back of concerns about slowing growth, a hawkish US Fed and the spread of the Covid-19 Delta variant. While growth is slowing (China peaked last year, the US earlier this year and Europe is likely peaking now), it is coming off a very low base. The recovery will slow but remain strong, and while the Delta variant will delay the recovery, the global economy will still transition to a more sustainable up-cycle. The uncertainty created by the Delta variant will allow central banks to provide more liquidity for longer, and over the next six to twelve months we believe bond yields will continue to rise with global economic growth. Read more >>
After another solid return in April, should we heed the old adage, “Sell in May and go away”? Believed to be an old English saying, the phrase originally stated: “Sell in May and go away and come on back on St Leger’s Day”. Traders would leave the city of London in the hot summer months and return for the St Leger Derby in mid-September. Today, it is used to refer to the historically weaker performance of equities during the middle of the year. Read more >>
Markets are up a roaring 13% in the first quarter of 2021 but with such a swift rally, the question of a bubble arises. Unfortunately, a market bubble is a phenomenon best identified with hindsight. Having said that, there are bubble characteristics that you can watch out for, such as exponential price movement, extreme valuations, retail leverage and a “this-time-itsdifferent” investment case. Looking at price action, the only truly exponential moves seem to be linked to digital innovation and ESG. Since 2014 cryptocurrencies have risen by a factor of 160, innovation stocks are up six times, special purpose acquisition companies (SPACs) and solar energy have tripled while European renewables have doubled. Read more >>
February saw the best market upswing since the 1930s: the S&P 500 is up 75% from its Covid lows, just behind the bull run that followed the lows of June 1932, which peaked at 78%. Markets were driven by the expectation of more stimulus to drive growth, with Biden’s $1.9 trillion fiscal package widely expected to be passed by Congress, lifting US and global growth and inflation expectations. Read more >>
Globally, gaming company GameStop has stolen the limelight, worrying fundamental long-only investors while terrifying the hedge fund industry, who are the largest short sellers. Populism has hit capitalism in its backyard: gamers and Reddit users basically decided to start buying up GameStop Corp stock, driving prices up and digging a significant hole in the pockets of hedge funds that had taken short positions on the stock. Between 20 January and 26 January, GameStop’s stock value leaped from just over $35 a share to north of $140 a share. By 27 January, it had hit new highs of over $325 a share and had increased more than 8 000% in the space of a few months. Read more >>
As the world limps towards the end of what seems like the longest year in history, markets are weary, investors are exhausted, and the light at the end of the tunnel seems miniscule. 2020 has weathered a global pandemic and the worst recession since World War II while heightened risk remains from US elections, Brexit and Covid. Amazingly, global equity markets have recovered all their losses this year and are now trading close to record highs against all odds. Global markets found some support with the Brexit can kicked down the road to a new deadline of mid-November and oil is supported after Russia announced it is ready to keep the OPEC+ curbs on oil output longer than planned. Read more >>
The dollar had its weakest month in 5 years as US data disappointed, the number of confirmed Covid-19 cases rose, and the probability of a Democratic victory increased. While Trump trailed Hillary Clinton in the 2016 presidential polls, he only lagged by 3%, and national opinion polls put Biden almost 10% ahead of the incumbent going into November’s US elections. Nevertheless, Trump made sure to steal the headlines, implementing sanctions against Chinese and Hong Kong officials, stripping Hong Kong of visa-free travel to the US and removing Hong Kong’s special economic status. The US rejected China’s claims to resources in the South China Sea and plans to prevent investment in US-listed Chinese firms. The US also ordered China to close its consulate in Houston to protect American IP and subsequently invaded the consulate. The UK declared that Huawei technology will not be used in its 5G network, while the EU is preparing to take action against China for the controversial Hong Kong security law. Despite this, China’s stock market led the equity rally in July, as Trump’s influence begins to wane Read more >>
We are halfway through the year and, despite a strong recovery, markets are still caught between conflicting signals. On the positive side, forward-looking indicators such as Empire and Philly Surveys suggest that the recession is already over in the US; global growth is set to rebound in Q3 as economies open up; a Covid-19 vaccine is likely soon given the unprecedented government funding to drug makers; policy remains supportive; and a potential Biden victory could contain geopolitical risk with China. Read more >>
Global economies began their slow emergence from lockdown in May, evidenced by Google’s Global Mobility Index, which reviews phone location data from 125 countries (you are being watched!). The Oxford Stringency Index reflects a similar story, with most countries dropping to around 70 out of 100 (see Chart 1). Markets rallied as a result of the opening up of economies, further clarity on fiscal support and the provision of additional liquidity. While a second wave of infections is a major concern, after four weeks into the relaxation process there has been little evidence of a resurgence, and analysis by UBS and JPMorgan actually shows a decrease in the daily infection rate in most countries post-lockdown, as social distancing and testing appear to have been effective. Optimism about vaccines is also increasing, as over 160 vaccines are now being researched, with five having started human trials and positive reports about American biotechnology company Moderna’s vaccine and Gilead’s remdesivir. Read more >>


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