New article from Tatton Investment Management: A sigh of relief
25 January 2021
Yellen also indicated that she would like the Treasury to “term-out” the debt – going beyond the current longest of 30-year debt, issuing 50-year and 100-year bonds. This would effectively neutralise the cost of near-term debt servicing by tying it to the prevailing ultra-low interest rate levels, while postponing repayment into the very far distant future – ‘kicking the can’ into the next century.
We estimate, under current bond market conditions, a US Treasury of 100-year maturity would carry a yield of a bit under 2¼%. That level is consistent with the mandate of maintaining a stable debt-to-GDP ratio, as it roughly matches longer-term GDP growth expectations and would therefore be acceptable to the Treasury, and perhaps would even help to convince fiscally conservative Republicans that this constitutes a viable investment, rather than merely a millstone of debt for future generations.
Stock markets appeared happy enough and continued to rise, providing one of the most positive receptions of an inauguration in history. While pleasing for investors –?ours included – it is increasingly putting markets out of alignment with the most optimistic of assumptions. As we have noted before, and consider in more depth in the separate article on earnings below, current valuation levels are deemed ‘rationally exuberant’ – on the basis that declined corporate earnings yields are still exceeding the even lower government bond yields by roughly the same margin as they have historically. As earnings are anticipated to recover when pent up demand catapults the economy back to above the previous rate of growth, valuation levels should normalise, while potentially providing further market upside should the recovery prove stronger than anticipated. Unfortunately, this also assumes central banks will keep interest rates and bond yields supressed, even if economic activity roars back to life – a scenario at odds with itself.
This chain of assumptions makes markets vulnerable to setbacks, due either to future corporate earnings growth or changes in bond yields, with or without further central bank action. The latter is why our second article this week discusses the prospect of inflationary pressures arising from the new US President’s fiscal stimulus plan. It is true that central banks have stated they are willing to tolerate a temporary overshooting of their inflation targets, but the question is by how much and for how long, or rather whether markets are pricing-in higher levels of (inflation-driving) growth than central bankers may deem acceptable if they want to remain aligned with their longer-term monetary stability targets.
So, ‘inflation watch’ has become essential viewing for investors in 2021, but it is not just for this reason that inflation has re-entered broader media coverage recently. People’s experience is that excessive government spending fuelled by central banks buying up debt eventually leads to runaway inflation, which undermines monetary stability and in its wake the economy and prosperity. While this observation has historical merit, it is not quite that simple. Put simply, if there is more demand which is also backed up by more money at hand than there is supply, then prices are bid up. However, such price pushes only turn into inflation (sustained periods of rising prices), if wage earners can compensate those rising prices through rising wages. Economists currently neither expect that there will be a sustained lack of supply of goods and services, nor do they expect wage earners will have a strong enough a negotiating position to realise inflation-beating pay rises while there is also mass unemployment.
If the uber-optimists have their way, and economies bounce within the shortest of time periods from the worst recession on record to the biggest economic boom on record, then it is conceivable that mass unemployment will turn to wage-increasing labour shortage. However, that is not a particularly realistic expectation, and so it is probable that (just as was the case in the multi-year period before the pandemic), low levels of unemployment do not lead to galloping wage inflation.
This does not mean inflation will never rear its ugly head again, but it is far more likely to be an issue further into the future, if de-globalisation and a shrinking working age population – coupled with migration prevention – reverses the deflationary forces of the past decades and rebalances the distribution of GDP between capital and labour. Not something of global concern for the next couple of years maybe, but perhaps a more isolated issue for countries seeking societal salvation in erecting barriers to exchange of both goods and labour.
Nevertheless, even in the absence of actual inflation, the mere fear of it could become a risk to 2021’s equity markets, which have grown dependent on low interest rates, while also requiring forthcoming above-average economic growth. We remain positive about the prospects for the global economy, but at the same time retain our professional wariness which has us monitor the economic and capital market variables very closely, as we steer investment portfolios though these uncharted waters.
News Archive
26 February 2021
New article from Tatton Investment Management: Earnings look set to stabilise wobbling markets
19 February 2021
New article from Tatton Investment Management: One year on - who would have thought
12 February 2021
New article from Tatton Investment Management: No UK double dip, but much talk of bubbles
5 February 2021
New article from Tatton Investment Management: Calming of nerves
1 February 2021
New article from Tatton Investment Management: A fraying of nerves
25 January 2021
New article from Tatton Investment Management: A sigh of relief
15 January 2021
New article from Tatton Investment Management: Fiscal turbo replaces lame duck Trump
8 January 2021
New article from Tatton Investment Management: End points and new beginnings
18 December 2020
New article from Tatton Investment Management: Goodbye to all that
14 December 2020
New article from Tatton Investment Management: Outlook 2021 - no deal Brexit?
4 December 2020
New article from Tatton Investment Management: December concerns over baubles and bubbles
27 November 2020
New article from Tatton Investment Management: Fiscal floundering
20 November 2020
New article from Tatton Investment Management: More tunnel before the light
18 November 2020
Interim Results For The Six Month Period Ended 30 September 2020
13 November 2020
New article from Tatton Investment Management: Change is in the air
6 November 2020
New article from Tatton Investment Management: Looking beyond the obvious
4 November 2020
New article from Tatton Investment Management: US Election Update
2 November 2020
New video from Tatton Investment Management: US election, the response to the pandemic and Brexit
30 October 2020
New article from Tatton Investment Management: Unsettled week ahead - or behind
26 October 2020
New article from Tatton Investment Management: Sunlit uplands or COVID gorge?
19 October 2020
New article from Tatton Investment Management: Watching and waiting
12 October 2020
New article from Tatton Investment Management: Baffling market optimism
2 October 2020
New article from Tatton Investment Management: A question of time horizons
25 September 2020
New article from Tatton Investment Management: A recovery on hold
18 September 2020
New article from Tatton Investment Management: Taking a step back to look forward
14 September 2020
New article from Tatton Investment Management: Frictions and contradictions
7 September 2020
New article from Tatton Investment Management: Market dynamic of a K-shaped recovery
1 September 2020
New article from Tatton Investment Management: Big tech gets bigger while the Fed takes the easy opt
24 August 2020
New article from Tatton Investment Management: Fed leaves bond investors with that sinking feeling
17 August 2020
New article from Tatton Investment Management: COVID II the sequel - as scary as the original?
10 August 2020
New article from Tatton Investment Management: July brings consolidation
2 August 2020
New article from Tatton Investment Management: Sunshine and shadows
27 July 2020
New article from Tatton Investment Management: PPE = Politics, Pressure and Economics
20 July 2020
New article from Tatton Investment Management: Discomfort of disappearing safety nets
13 July 2020
New article from Tatton Investment Management: Fast and freewheeling
3 July 2020
New article from Tatton Investment Management: H1 2020 offers meaningful lessons
29 June 2020
New article from Tatton Investment Management: Support balances increasing strains - for how long?
22 June 2020
New article from Tatton Investment Management: Equity valuations follow bond valuations' lead
15 June 2020
New article from Tatton Investment Management: Stock markets suffer altitude sickness
8 June 2020
New article from Tatton Investment Management: Markets are enjoying an uncomfortably benign pandemic
1 June 2020
New article from Tatton Investment Management: Optimistic markets despite second wave lockdown threa
26 May 2020
New article from Tatton Investment Management: Just as the sun comes out, clouds appear in the East
22 May 2020
New video from Tatton Investment Management
18 May 2020
New article from Tatton Investment Management: Us-China cold war: Threat or blessing?
11 May 2020
New article from Tatton Investment Management: Most welcome, if feeble, signs of pulling together
4 May 2020
New article from Tatton Investment Management: Opening-up will be slower than locking down
27 April 2020
New article from Tatton Investment Management: V or U-shaped recovery scenarios - the jury is out
20 April 2020
New article from Tatton Investment Management: Lifting lockdown remains a delicate balancing act
20 April 2020
New video from Tatton Investment Management: Stock markets between hope and despair
15 April 2020
New video from Tatton Investment Management: Is now the time to invest?
13 April 2020
New article from Tatton Investment Management: Fading threat of financial crisis re-opens old divide
6 April 2020
New article from Tatton Investment Management: Unprecedented quarter or calm before the storm?
30 March 2020
New article from Tatton Investment Management: Extraordinary: bear and bull market all in one
24 March 2020
New video from Tatton Investment Management: Why have stock markets appeared to rally on the lock-do
23 March 2020
New article from Tatton Investment Management: Government ordered recession
19 March 2020
New video from Tatton Investment Management: Confusion reigns in Capital Markets
18 March 2020
New article from Tatton Investment Management: Why aren't you doing something?
17 March 2020
New video from Tatton Investment Management: From euphoric recovery to depressed tumble
16 March 2020
New article from Tatton Investment Management: Notes on a crash: the short, the medium and long term
13 March 2020
New video from Tatton Investment Management: Panic equity selling or panic raising of precautionar
12 March 2020
New article from Tatton Investment Management: Forced sellers and other distractions
9 March 2020
New article from Tatton Investment Management: Dark times or glimpse of light at the end of the tunn
6 March 2020
New article from Tatton Investment Management: News of a reverse oil price shock rattles markets bey
2 March 2020
New article from Tatton Investment Management: Coronavirus - hitting too close to home
28 February 2020
New article from Tatton Investment Management: This week's market correction requires perspective
26 February 2020
New article from Tatton Investment Management: COVID-19 and the reaction of markets to pandemic fear
24 February 2020
New article from Tatton Investment Management: US markets hit new all-time highs and a 'bump'
17 February 2020
New article from Tatton Investment Management: V-shaped recovery for Valentine
10 February 2020
New article from Tatton Investment Management: Markets show no fear - should they?
3 February 2020
New article from Tatton Investment Management: Looking through the noise of the week
27 January 2020
New article from Tatton Investment Management: Short break to Goldilocks?
20 January 2020
New article from Tatton Investment Management: Parallels and differences to January 2018
14 January 2020
13 January 2020
New article from Tatton Investment Management: So far so good
8 January 2020
Tatton: Woodford & M&G suspensions have driven IFAs to us
6 January 2020
New article from Tatton Investment Management: 2020 starts with a Trump card
23 December 2019
New article from Tatton Investment Management: Goodbye 2019 - welcome 2020 and a new decade!
16 December 2019
New article from Tatton Investment Management: Brightening horizons - 2020 Outlook
8 December 2019
New article from Tatton Investment Management: Can Trump derail the 2020 economic upturn?
2 December 2019
New article from Tatton Investment Management: Markets are driving the markets
25 November 2019
New article from Tatton Investment Management: Markets pause for reality check
18 November 2019
New article from Tatton Investment Management: Swilling cash eases the market mood music
11 November 2019
New article from Tatton Investment Management: Recession concerns retreat
11 November 2019
Interim Results for the six months ended 30 September 2019
4 November 2019
New article from Tatton Investment Management: Crucial October period safely behind
28 October 2019
New article from Tatton Investment Management: Slowly turning
21 October 2019
New article from Tatton Investment Management: Brexit breakthrough versus Brexit fatigue
17 October 2019
17 October 2019
Acquisition of Sinfonia Asset Management Limited (SAM)
14 October 2019
New article from Tatton Investment Management: Market sentiment rebound
7 October 2019
New article from Tatton Investment Management: Stall speed economy fears spreading
30 September 2019
New article from Tatton Investment Management: Ominous US-Dollar strength
23 September 2019
New article from Tatton Investment Management: Diverging economic trends - catalyst for trade war re
16 September 2019
New article from Tatton Investment Management: Market sentiment rebound
9 September 2019
New article from Tatton Investment Management: Choppy water but no storm, yet...
2 September 2019
New article from Tatton Investment Management: Fattening 'tails'
27 August 2019
New article from Tatton Investment Management: Populism politics reversing austerity?
19 August 2019
New article from Tatton Investment Management: Market spat between bond and equity markets
11 August 2019
New article from Tatton Investment Management: Bond markets unnerve equity markets - again
5 August 2019
New article from Tatton Investment Management: The Elephant and the Little Old Lady
29 July 2019
New article from Tatton Investment Management: The quick and the not-so-quick
22 July 2019
New article from Tatton Investment Management: ...'Twere well it were done quickly
15 July 2019
New article from Tatton Investment Management: Positioning for a summer of wait and see
8 July 2019
New article from Tatton Investment Management: Liquidity drives stock markets to new highs
1 July 2019
New article from Tatton Investment Management: The middle of the year - a tipping point?
24 June 2019
New article from Tatton Investment Management: Battle of the ‘doves’
17 June 2019
New article from Tatton Investment Management: Mixed messages
10 June 2019
New article from Tatton Investment Management: The return of the central bank put?
3 June 2019
3 June 2019
Appointment by Frenkel Topping
3 June 2019
Preliminary Results For the year ended 31 March 2019
3 June 2019
New article from Tatton Investment Management: Bond rally musings
27 May 2019
New article from Tatton Investment Management: It is getting warmer
20 May 2019
New article from Tatton Investment Management: Market support for Trump or unwarranted equanimity?
13 May 2019
New article from Tatton Investment Management: Geopolitics re-enter market stage
7 May 2019
New article from Tatton Investment Management: Central banks disappoint expectations
29 April 2019
New article from Tatton Investment Management: Waning market stimuli put stock markets on notice
23 April 2019
New article from Tatton Investment Management: Spring time from here?
16 April 2019
Trading Statement for 12 months ending 31 March 2019
15 April 2019
New article from Tatton Investment Management: Brexit in-limbo aside sentiment is improving
8 April 2019
New article from Tatton Investment Management: Happy 10th birthday, choppy bull market
1 April 2019
New article from Tatton Investment Management:29 March 2019 – quarter end
25 March 2019
New article from Tatton Investment Management: Brinkmanship and extensions
18 March 2019
New article from Tatton Investment Management: Bits & Pieces
11 March 2019
New article from Tatton Investment Management: ECB stimulus U-turn leaves markets unimpressed
4 March 2019
New article from Tatton Investment Management: £-Sterling ‘applauds’ prospect of Brexit delay
25 February 2019
New article from Tatton Investment Management: Progress?
18 February 2019
New article from Tatton Investment Management: Investment perspectives for different Brexit outcomes
15 November 2018
Interim Results for the six months ended 30 September 2018
15 October 2018
New article from Tatton Investment Management: Autopsy of a stock market sell-off
1 October 2018
New article from Tatton Investment Management: Poor politics containing bond market risks?
27 September 2018
New article from Tatton Investment Management: Brexit clamour vs. real market new
7 September 2018
New article from Tatton Investment Management: Interesting times ahead
31 August 2018
New article from Tatton Investment Management: “Not the end of the world”
24 August 2018
New article from Tatton Investment Management: Steady markets vs. noisy politics
17 August 2018
New article from Tatton Investment Management: Political strongman tactics come home to roost
10 August 2018
New article from Tatton Investment Management: Summer heat wave makes way for return of political he
3 August 2018
New article from Tatton Investment Management: A gentle deceleration?
27 July 2018
New article from Tatton Investment Management: Hot air for a hot summer?
20 July 2018
New article from Tatton Investment Management:Earnings are growing, why worry?
13 July 2018
New article from Tatton Investment Management: Hard Brexit demonstration potential?
6 July 2018
Notice of Annual General Meeting
6 July 2018
New article from Tatton Investment Management: It is getting hot
29 June 2018
New article from Tatton Investment Management: Digesting or consolidating?
27 June 2018
Preliminary Results for the year ended 31 March 2018
22 June 2018
New article from Tatton Investment Management: Fragile recovery
15 June 2018
New article from Tatton Investment Management: No surprises
8 June 2018
New article from Tatton Investment Management: Delicate equilibrium
1 June 2018
New article from Tatton Investment Management: Ignore politics at your peril
25 May 2018
New article from Tatton Investment Management: GDPR? No - far more interesting news!
18 May 2018
New article from Tatton Investment Management: What's the economic reality of this week's news?
11 May 2018
New article from Tatton Investment Management: Batten-down-the-hatches?
4 May 2018
New article from Tatton Investment Management: Past the peak?
27 April 2018
New article from Tatton Investment Management: Confusing signals?
20 April 2018
New article from Tatton Investment Management: A mixture of messages
6 April 2018
New article from Tatton Investment Management: Could do better
6 April 2018
New article from Tatton Investment Management: Peaking, plateauing or dimming – and how about that
29 March 2018
New article from Tatton Investment Management: End of a stormy quarter
23 March 2018
New article from Tatton Investment Management: Now we know it's risky!
16 March 2018
New article from Tatton Investment Management: Back to Normal?
9 March 2018
New article from Tatton Investment Management: Tariffs to growth
2 March 2018
New article from Tatton Investment Management: Time to take some profits
23 February 2018
New article from Tatton Investment Management: Change of direction or gradual normalisation?
16 February 2018
New article from Tatton Investment Management: Breathing easier for the moment
9 February 2018
New article from Tatton Investment Management: Meteoric stock markets crash bac
6 February 2018
Tatton Investment Management's Stock Market Correction Assessment
2 February 2018
New article from Tatton Investment Management: Good news turns bad news - again!
26 January 2018
New article from Tatton Investment Management: Surprises
19 January 2018
New article from Tatton Investment Management: US$ weakness versus Bitcoin and Carillion
12 January 2018
New article from Tatton Investment Management: Bullish sentiment rings alarm bells
5 January 2018
New article from Tatton Investment Management: Encouraging kick-off
15 December 2017
New article from Tatton Investment Management: 2017 - taking stock
8 December 2017
New article from Tatton Investment Management: Progress versus Bitcoin
5 December 2017
Interim results for the six months ended 30 September 2017
1 December 2017
New article from Tatton Investment Management: Sudden, but not entirely unexpected
24 November 2017
New article from Tatton Investment Management: Invincible markets?
17 November 2017
New article from Tatton Investment Management: Yield-curve flattening: a bad omen?
10 November 2017
New article from Tatton Investment Management: Nervous investors herald more volatile markets
3 November 2017
New article from Tatton Investment Management: UK rate rise: ‘one and done’ or beginning of rate
27 October 2017
New article from Tatton Investment Management: Trick or treat season
13 October 2017
New article from Tatton Investment Management: All-time highs and Q3 results outlook: Reasons to be
6 October 2017
New article from Tatton Investment Management: Bad news – good news
29 September 2017
New article from Tatton Investment Management: Movements
22 September 2017
New article from Tatton Investment Management: QT to reverse QE and 2-year transition period to soft
15 September 2017
New article from Tatton Investment Management: BoE guides for year-end rate hike - Bluff or real?
8 September 2017
New article from Tatton Investment Management: ‘Back to school’ amidst hurricanes, earthquakes
1 September 2017
New article from Tatton Investment Management: Bad news, Good news
25 August 2017
New article from Tatton Investment Management: Summer low or summer lull?
18 August 2017
New article from Tatton Investment Management: More sellers than buyers
11 August 2017
New article from Tatton Investment Management: Stocks take note of North Korea crisis - or do they?
4 August 2017
New article from Tatton Investment Management: Consolidated base but momentum dwindling
28 July 2017
New article from Tatton Investment Management: Summer thoughts about the ‘longer term’
21 July 2017
New article from Tatton Investment Management: Summer lull - delayed
14 July 2017
New article from Tatton Investment Management: Pre summer-holiday investment check
7 July 2017
New article from Tatton Investment Management: Global growth ploughs on while markets take a breathe
23 June 2017
New article from Tatton Investment Management: Quo Vadis Britain?