New article from Tatton Investment Management: Frictions and contradictions

14 September 2020

September has ended what now feels like a ‘goldilocks’ summer for investors, and political, societal and capital market frictions have returned to the stage with a bang. However, the fact that stock markets have not simply plunged on bad news, but have instead remained surprisingly stable, is a good indication that economic and market dynamics are not quite as simple as they may appear. Following a summer of hopeful yet gradual recovery the second wave of Covid has not prompted a sudden return to depression and decline. The reason for this is most likely that there is a general feeling that we have indeed learned to cope with the virus, even if we have to accept that things will not return to our old normal for some time yet.
 
Starting with stock market action over the past week, market strategists, who for much of August struggled to make sense of the upward surge in the top US tech stocks, appeared to have found the culprit and cause. Enter Softbank, a Japanese technology investment house that suffered substantial losses over its hapless backing of 2019 tech darling WeWork. Softbank appears to have spurred markets and whipped-up the recent froth through large derivative positions in tech stocks – with the aim of winning back of what had been lost. But while humans have a tendency to embrace the straightforward explanations over the more comprehensive ones, reality tends to be multi-factored rather than mono-causal.
 
It would seem that Softbank’s speculative investments was one element, but as is often the case, sharp market moves are based on a coincidence with other factors: some reports point to perhaps millions of small US retail investors who (in their boredom of COVID activity constraints) had put some of their government support windfall cash to work – and this not only through straight forward cash equity investments but also options, i.e. geared. Now that the US government has halved its generous support payments to $300 per week, many are starting to worry whether they will indeed be returning to gainful employment as quickly as first expected. As a result, this massive burst of incremental investment liquidity is disappearing – and with it some of the unhealthy exuberance built up in US tech stocks. Given the wider monetary and fiscal support spectre that was behind the swift market recovery in Q2, it is perhaps not surprising that the stock markets at large have held up rather better.
 
Staying with capital markets, but turning towards the virus-driven expectation set, it would appear that recovered levels are perhaps not just all dependent on the combination of near?term vaccine hopes and central bank liquidity injections. Back in May, we would have expected AstraZeneca’s halting of their vaccine trial – on the back of an unexplained but serious neurological inflammation that one of their patients suffered –  to send stock markets into free-fall. That it did not happen this week might well have to do with the observation that Europe’s relapse in infection rates back to April’s levels appears to have astonishingly little impact on public health when compared with the first wave (see chart below).


 
It is too early to conclude that the virus has ‘burnt itself out’ and will gradually disappear as a threat. The very different paths of the graph above could have a number of explanations, not all of them encouraging. Nevertheless, the slightly contradictory market reaction seems to indicate that markets no longer assume the second wave will hold back the economic recovery enough to derail expectations of a rebound of longer-term earnings growth.

Many will have – like us at Tatton – registered with dismay that the UK government found it necessary to restrict our range of social interactions once again. As we wrote last week, any return of higher levels of activity restriction and fear are going to increase the damage for the economy. On reflection, it may be a necessary – but hopefully only temporary – step to reiterate the public health message that this epidemic is not yet over and stress the importance that people limit the spread of the virus until a more permanent solution becomes available. Despite qualifications over the flattening of the public health impact curve mentioned above, it is possible that if the trend nevertheless continues for another month, activity restrictions may become unenforceable and indeed less called for – even before a vaccine can be deployed for the vulnerable and elderly. In the meantime, governments may be faced with increasing frictions between the frustrated and less-affected young and the more vulnerable (ruling) old.

Given these virus-related political pressures, it is unclear why the UK’s government chose this week to further increase political stresses by announcing their planned breach of the European Union Withdrawal Agreement. The decision has only served to undermine the nation’s standing as a contractual counterparty in the international political arena in an unprecedented way. It appears most likely to be a combination of political actors lacking relative experience paired with a certain gung-ho attitude to shake things up for the better of the country. But, as with the previous disconcerting negotiation moves, this one should probably not be taken as seriously as it was by  currency markets, which responded with a distinct mark-down of £?Sterling. At the end of the day, it remains – now even more than before – in the very best interest of both sides to achieve a mutually beneficial trade deal, rather than falling out with their biggest trading partners at the very point that economic headwinds would be most destructive. Just as the government’s 31 July deadline passed without any further mention, we would not be surprised to see 15 October pass in the same way. The real deadline to watch is the summit of European heads of state in early December. Our expectation is that the final outline of the future arrangements will only come together then – after a few nights of gruelling debate.

News Archive

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

Appointment of Joint Broker

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

Trading Statement

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

Appointment by Tenet Group

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?