Interesting Articles

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 >>
We are at the end of an epoch. An era that began 100 years ago is now reaching its inevitable conclusion. The last several decades saw changes in society, government, finance, and geopolitics that built the world we knew. These changes contributed to the destruction of the old and set the stage for what is next. Change has prepared the way for more change. Many complex factors have aligned to create conditions for a cataclysmic transformation of society. The geopolitics of our world, the mechanics of our financial markets and power structures, and events like the 2008 financial collapse have all laid the groundwork for COVID-19 to impact the world in the manner it has.  This has ignited a spark with secondary and Nth order effects we are just beginning to see unfold. The actions of the last eight weeks have set into motion an unstoppable chain of events. This will forever transform our lives, our markets, and our world. It is time for new ways of thinking and solving problems. Read more >>
The World Health Organisation (WHO) characterised the Covid-19 (coronavirus) outbreak as a pandemic on 11 March. Since then, numerous countries have declared a state of emergency and gone into full lockdown, including the US, UK, Italy, Hungary, the Philippines, Japan and, of course, South Africa. The devastation reached Wall Street which recorded its worst session since 1987 and fell 34% from its peak, while oil prices are down to levels last seen in 2002. The effect also touched the South African All Share Index which found a short-term bottom, 36% from its January peak. World governments have compared Covid-19 to a war, noting significant human and economic global challenges, and the impact on global GDP is somewhere between a natural disaster and a deep recession. 2020 growth will follow the pattern of a natural disaster, with the deepest GDP fall since World War II, but is expected to rebound sharply by the end of the year. However, lingering uncertainty, job losses and business closures will weigh on demand until at least the end of 2021. There have been seven global recessions over the last century of this magnitude: two driven by war (World Wars I and II), two driven by balance sheet recessions (the 1930s Great Depression and the 2008 Great Financial Crisis), two driven by oil shocks (1973 and 1981) and now the first to be driven by a global pandemic. Read more >>


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