Please see the below the Daily investment Bulletin from Brooks Macdonald, which was received this morning – 16/11/2023:
What has happened
Bond markets reversed some of their rally on Wednesday as markets pondered whether the dovish pivot had travelled a little too far in the short term. Stronger than expected corporate earnings and economic data also pushed back against the soft landing narrative, suggesting an economy which still has plenty of momentum. Despite these moves, US equity markets managed to secure a small gain.
Economic data
The sell-off in bonds was driven by a series of positive economic releases with the US retail sales numbers one of the most highly anticipated. The headline retail sales contracted by a smaller amount than expected with the September reading actually revised up. The New York Fed’s Empire State manufacturing survey expanded reasonably positively compared to expectations for a contraction and Target saw a strong earnings released with a 17.8% share price gain on the day.
China/US meeting
President Biden and Chinese Premier Xi met in California yesterday to discuss US/China relations. The mood music from the meeting was largely positive with Biden characterising the talks as ‘some of the most constructive and productive discussions we’ve had.’ In terms of concrete actions from the talks, the leaders agreed to reopen high-level military communication which had been suspended after Speaker Pelosi visited Taiwan in August 2022. Climate Change, Artificial Intelligence and the upcoming Taiwanese elections were all discussed with the press conference focusing on the last point in particular. A counter-narcotics working group is being set up to tackle the export of chemicals used to make fentanyl which is behind a recent drug epidemic across the US.
What does Brooks Macdonald think
The US/China summit took a tone of cautious diplomatic optimism which will be welcomed by investors. On the sidelines of the summit were representatives from major US corporations looking for a steer as to the future trade opportunity with China. Premier Xi addressed business leaders, saying that ‘China is both a super-large economy and a super-large market… modernisation for 1.4bn Chinese is a huge opportunity that China provides to the world.’ With the US Presidential elections looming, these positive relations may become more fraught as Republicans and Democrats compete on their hawkish Chinese stances, but yesterday’s de-escalation was welcomed by markets.
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Carl Mitchell – Dip PFS
Independent Financial Adviser
16/11/2023