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Legal & General Asset Allocation Team Key Beliefs Blog

Please see article below from Legal & General’s asset allocation team – received 14/09/2020.

Our Asset Allocation team’s key beliefs

Recurring patterns

The day after the UK voted to leave the EU – more than 1,500 days ago – we wrote in our Key Beliefs that “Brexit will now dominate markets for a while longer and be a market factor for years to come”. This week, we cover the latest developments in that ongoing saga and two other recurring issues for markets.

As with all Key Beliefs emails, this email represents solely the investment views of LGIM’s Asset Allocation team.

Rule Britannia, Britannia waives the rules

The result of last year’s election reduced the probability of a soft Brexit outcome, in our view. Since then there has been no real progress in discussions with the EU, so the chances of a comprehensive deal have dwindled further.

The new Internal Market Bill, and the news that the state-aid regime will not be ready until mid-2021, further lower the likelihood of securing a deal. This means that – barring a Parliamentary block, a policy U-turn, or a significant softening in approach from Brussels – we are probably now looking at a narrow range of outcomes between a hard exit and a slightly less hard exit. The difference in economic impact between the two is relatively small, and is likely to be swamped in the current environment by COVID-19 developments and fiscal and monetary policy.

This news is not particularly shocking, as negotiations with the EU have been going back and forth for a while, but investors have woken up to Brexit risks again in the past few weeks. With the market probability of a no-deal exit reaching approximately 80% in our estimates, sterling fell by around 4% against the euro and US dollar.

Looking forward, the narrowing Brexit outcomes should mean sterling’s range is more limited too, so we wouldn’t expect the wild swings in the currency of recent years. We believe the tail risks are also skewed to the upside from here: a no-deal scenario may see a touch more weakness, but a sniff of a deal could stoke a greater recovery.

Israel: the first domino?

The unsettling news for Israel is that COVID-19 dynamics in the country are deteriorating on all fronts, with the government announcing a second lockdown on Sunday. Many had supposed that the economic pain of shutdowns would deter politicians from re-imposing them, but Israel has demonstrated that we shouldn’t rely on that.

The question we need to ask ourselves is whether Israel is the first domino to fall and if Spain and France are the next ones to topple. There are some idiosyncratic differences between Israel and continental Europe, such as in party politics, demographics and behavioural tendencies, but equally it is possible to draw some parallels.

Spanish and French ICU capacity per person is greater than Israel’s but, at current rates of case-load expansion and growing ICU occupancy rates, Spain looks like it may become stretched by the end of September and France potentially a month or so later. That said, the head of the Spanish health-emergencies department believes Spain has already turned a corner for the better in its latest wave.

We believe further full-country lockdowns in Europe are not part of the consensus thinking in markets, so there is a downside risk, but more lockdowns could mean more stimulus too.

Fiscal fail

Hopes for any further fiscal stimulus in the US before the elections darkened last week as a deal proposed by the Republicans failed to pass a Senate vote. Negotiations have become increasingly difficult of late and a failure to pass a deal soon puts millions of Americans in jeopardy.

While there is a wide range of outcomes over the next few months, the risk of the economy stalling in the fourth quarter has risen. The consensus probability of a stimulus deal stood as high as 90% a month ago but, with those odds plummeting, economists will need to embark on a series of forecast downgrades if Congress fails to act. This was also a likely driver of weaker equity markets in the past week, hidden somewhat by the headline news of the technical squeeze in tech stocks.

Both sides still seem far apart on reaching agreement on another round of fiscal stimulus. Republicans do not wish to provide state and local government aid to ‘bail out’ Democrat states, while there is disagreement within the party on the type of stimulus and whether another round is even necessary. Democrats meanwhile voted against the proposals as they contained some ‘poison pills’, such as funds for the coal industry and a tax break for private school costs.

Additionally, the Federal Reserve is having problems with its Main Street Lending programme, designed to help small firms, with only $1 billion of loans out of a total capacity of $600 billion made so far. This means the central bank’s ability to offset an underwhelming fiscal stimulus could be reduced.

The drag on the economy is building, but not yet apparent in the data. The blockages in approving further stimulus should not be seen as a cliff, but an increasingly steep downhill ride the longer the standoff continues.

Another useful article from Legal & General covering the latest developments with regards to Brexit and other recurring issues for markets.

Please continue to check back for our latest updates and blog posts.

Charlotte Ennis


Team No Comments

Aviva – Remote Control – Take control of your wellbeing in remote working environments

Please see article below from Aviva which is a guide to taking control of your wellbeing in remote working environments – received 02/09/2020.

Remote Control – Take control of your wellbeing in remote working environments

This short guide gives practical advice, helpful guidance and support to anyone working remotely during the coronavirus pandemic.

‘Social interaction increases the spread of the coronavirus pandemic as it passes from person to person, by touch and through droplets in the air. Social distancing can dramatically slow the spread. That’s why working remotely for many businesses has become essential, in locations that are very different from normal working environments.

Staying in control, maintaining your mental and physical wellbeing can be a high challenge in these extraordinary circumstances. That’s why we’ve published this easy-to-read guide of practical tips and guidance. Life is difficult enough right now, so we’ve kept things as light and breezy as they can be. Stay safe, stay healthy and stay connected. We’ll get through this together’

Dr Doug Wright, Medical Director, Aviva UK Health and Protection

Mental Wellbeing – Some Top Tips

Stay connected and keep talking

The key message is: don’t suffer in silence. The more open everyone is about their mental health – whether they’re doing ok or struggling a bit – the better things will become. One of the most important things you can do at times like this is to talk to people and share how you are feeling. Connect with your colleagues or your manager (and if you’re a manager, don’t forget this applies to you too) and explain how changes, work allocation or the situation is making you feel.

Use wellbeing apps

There are many apps you can use to support your mental wellbeing, to help with mindfulness, meditation and overall mental wellbeing.

It’s essential to select the best app for the task, and that’s where NHS Digital steps in. Although health apps are not supplied by the NHS, it’s widely accepted that the NHS Digital’s Apps Library is the ‘go to’ place for reliable, objective information. It’s here you’ll find trusted mental health and wellbeing apps that have been assessed using rigorous standards. And when an app is improved or modified, it is reassessed.

Change where you work in your home

Don’t work with your laptop facing a blank wall! Your connection with the outside world begins with what you can see outside, just above your screen. It might be a back garden, it could be rooftops, it might be a not-so-busy street, but it’s your physical window on the world. So where do you work in your home? Each home is different, but what you should look for is known as a ‘command position’ that puts you in control. It’s a concept from Feng Shui, the ancient philosophy of living in harmony with your immediate environment. Basically, choose a position in the room that you work in that is furthest from the door and that also enables you to look out of a window. You’ll feel better for it. And in a time of crisis, empowerment starts here. Try it!

Control your intake of negative news

Your home is your castle. And as you work from home, you might feel as if its walls are under siege conditions. With social media and new technology enabling a 24/7 news feed, we’re experiencing constant updates on coronavirus. While some information is useful, too much immersion to this type of news can fuel alarm and tension. As we piece together the progress of COVID-19, the result of being plugged-in to a relentless news cycle can generate negativity, fear and anxiety. In short, if you feel bad about being isolated, the news will make you feel worse.

There’s a simple answer to this: prioritise your mental health and switch off. A bombardment of negative news needs a cut-off point, and you can limit your input just as you’d do for children and screen time. Rolling news isn’t necessarily the most accurate. Take a deep breath and catch up with it tomorrow when the facts are known.

Physical Wellbeing – Some Top Tips

Keep in shape as best you can

Whether you are physically distancing yourself from others, and/or in self-quarantine, you still need to maintain your physical wellbeing. You might not be able to go to your usual classes, gym or exercise activity, but don’t stop all kinds of exercise.

Do something different to get the heart rate going – it could be a skipping rope session, football kick-about or star jumps in the garden or back yard, or inside if you can’t go outside. Go for a walk or a run around the block (not getting too close to anyone else). Fresh air is still very important.

Why not use YouTube or those old exercise DVDs to do a workout? Remember the Wii Fit or Dance Mat? Is it gathering dust in the back of a wardrobe somewhere?

How the pandemic might affect your sleep and how to stay in control.

Have you been having broken or disrupted sleep? Vivid dreams or nightmares?

It’s understandable and you’re not alone.

With such unexpected, unprecedented changes, how you sleep is so incredibly important. It plays a critical role in your physical health and an effective functioning immune system. Quality sleep is also a huge contributor in emotional responses, physical and mental health, helping deter the onset of stress, depression, or anxiety. Whether you’ve had sleeping problems before COVID-19 or if they’ve only come on recently, there are steps that you can take to try to improve your sleep.

Team working at a distance

You can’t support the wellbeing of others if you don’t look after yourself To stay well, you need to consider your physical, mental, financial and social wellbeing – and there’s lots of support and advice available for everyone. Take a proper lunch break, get outside if you can (keeping your distance from others), practice mindfulness and make digital connections via social media and video chats. By doing these things to support your own wellbeing, and telling your colleagues about them, it can support everyone’s wellbeing.

Don’t let the fact that you and your team might be working remotely mean that it creates an ‘always on’ culture. Create working times to suit you and your colleagues, and stick to them. Perhaps create a routine that symbolises the end of your working day. Rest and recharging (physically and mentally) is really important to your wellbeing. If you are a manager and supporting your team, then you need to look after yourself too, giving yourself time to deal with the issues you yourself are facing.

How to lead virtual meetings

Establish virtual meeting principles with your team

• Does every meeting need an agenda?
• How often do we meet and when?
• How do we hear the voices of everyone?

Create a safe environment

By creating a few ground rules on how we interact with one another, such as not interrupting each other, accepting all ideas equally and not being judged, ‘out of the box’ suggestions are encouraged and listened to. Be a brilliant virtual meeting host

• Try and get familiar with the technology you are using.
• Bring energy and purpose to your gatherings, be ready to be flexible and adapt to the needs of the participants.
• Try and be the first in the room so you can meet and greet your participants.
• Consider adjusting start times to allow for things like comfort breaks and give the host space to be prepared and ready to go.

Keep the participants engaged

• Avoid the temptation to dive straight into business, a few moments of friendly chat before a meeting lightens the mood and strengthens the bonds of the group.
• Embrace check in’s and check out’s. Encourage everyone to contribute from the start.
• Listen out for the silence. Some characters are naturally more vocal and confident in these conditions than others. Invite contributions so everyone gets a say.
• Consider catching up 1-1 with anyone who appears to be struggling to contribute and establish a way that works for them and allows them to maintain a sense of belonging.

Following on from the Aviva – Looking after your mental health and wellbeing blog we posted last week (04/09/2020), this is another useful guide from Aviva with regards to our wellbeing whilst working remotely from home.

Working remotely may affect everyone differently but it could be particularly difficult for those who live alone. The tips above should prove useful in maintaining your mental and physical wellbeing.

Please continue to check back for our regular blog posts and updates.

Charlotte Ennis


Team No Comments

Looking After Your Mental Health and Wellbeing in Difficult Times

Please see article below from Aviva which is a guide to looking after your mental health and wellbeing in these difficult times – received 02/09/2020.

Staying on track Looking after your mental health and wellbeing in difficult times

It’s OK not to be OK all the time

The past few months have been a strange and anxious time for many. And even though things may be gradually getting back to normal now, it’s hardly the same ‘normal’ we knew before.

Moving out of lockdown and getting used to new ways of working can bring challenges of their own, even if you’re moving back to a familiar environment. Just as importantly, the challenges don’t end when you go home. In these difficult circumstances, you may be worrying about the health of family or friends or finding it hard to relax when you’re staying mindful of social distancing. All of this can add up.

It is common to have times in our lives when we feel we just can’t cope. It’s nothing to be embarrassed about.

Thanks to national campaigns and changing attitudes, many people now feel more able to talk openly about mental health issues – and to pass on guidance about looking after wellbeing, both physical and mental.

This brief guide is designed to help you look after your mental health at work and in your home life – by pointing out some warning signs that might show if you’re struggling to keep stress at bay, as well as offering some suggestions on what to do if you’re feeling the strain, and how to get back to your best.

First steps

Before you return to the workplace, it’s a good idea to think about your job and any issues that apply to your own unique situation – all of us are individuals with our own priorities and commitments. Plan an initial conversation with your manager and think of the questions you’d like to ask in advance. These can cover practicalities, as well as more general concerns – knowing exactly how your return to work will be managed and the safety measures in place will increase your confidence and help you avoid anxiety.

Warning signs to look out for

It’s all too easy to tell ourselves we feel fine, or that we’re managing all right, when in fact stress could be affecting our wellbeing more than we realise. It’s only natural to have ups and downs from one day to the next. But there are a number of signs – both physical and behavioural – that might indicate that someone is struggling and could be at risk of developing poor mental health such as:

  • Frequently feeling more irritable, aggressive or feelings of nervousness of anxiety
  • Increased fatigue, poor sleep or nightmares.
  • Feeling overwhelmed by everyday tasks or commitments.
  • Lack of interest in personal appearance or hygiene.
  • Withdrawal from social and personal interactions with family or friends.
  • Drinking or smoking more than usual.
  • Increased physical symptoms such as headaches, aches or pains, or digestive problems. Loss of interest in work or leisure activities.

Working from home: Time to reflect on the positives

You may have heard that pressure is a motivator – and it’s true to say that a manageable level of pressure can improve productivity. But when the pressure is too high, or lasts too long, it can cause stress – which can eventually lead to poor mental health. The pressure of work can be especially strong now that many businesses and organisations are coping with the economic and practical implications of COVID-19. And if you’ve recently returned to the workplace after working from home, remember that a change back to something you did before is still a change – which can be stressful in itself.

Take work issues in hand

If a situation at work is affecting you and you can’t resolve it yourself, try talking to your manager about your concerns. Or, if you’re not comfortable taking the issue to your manager, try to find someone else in the organisation. You could try talking to your personnel department or a trade union representative. And if your organisation has an employee assistance programme (EAP), check if it offers access to counselling or other sources of specialist help. This can also be a good route to take if you just need to talk with someone.

Keeping on top of things

Even if you don’t have specific issues to discuss, it’s a good idea to have regular one-to-one talks with your manager to share how you’re feeling and whether the experience of returning to work has met your expectations. And, as well as your manager or other team members, there’s someone else you need to ‘check in’ with on a regular basis – yourself. Ask yourself how you’re coping, and what you could do for yourself to stay mentally healthy, as well as what might be done differently at work.

Putting work concerns into perspective

Sometimes, we can put ourselves under more pressure than we need to at work. It’s all too easy to worry that the boss would be less than happy if we need to devote more time to commitments outside work. But most employers are conscious of their duty of care, and increasingly recognise that flexible working can boost productivity as well as being positive for employees.

Thankfully, many would prefer their employees to go home on time, or work from home so they can meet family commitments, rather than putting in consistently long hours and compromising their wellbeing. By carefully apportioning your time and priorities, you may find that it’s possible to improve your work-life balance. In practical terms, you could try allocating specific times to individual tasks instead of just writing a ‘to do’ list at the end of each day. This can give you confidence that you’ll have time to get everything done instead of dwelling on the following day’s challenges even when you’re not working.

Think about your working environment

If you’re returning to the workplace after working remotely, this could be a good time to review your working environment. If you aren’t comfortable, or don’t feel at ease with your surroundings, you could risk harming both your mental and physical health.

When you get home

It’s easy to let worries about things we can’t directly influence encroach on time that could be devoted to relaxation or enjoying the company of loved ones. The ease of access to news through digital as well as traditional channels can be overwhelming – especially when the news is largely unsettling. You could think about taking in updates at specific times, rather than through an ‘always on’ approach. Being unable to talk about your worries can make them worse. Talk to someone you trust about anything that’s on your mind.

Taking the physical activity route to good mental health

Physical activity and exercise can help reduce the effects of stress. In addition to the obvious benefits to fitness, exercise releases hormones which can help you to manage stress and promotes better sleep. Taking the physical activity route to good mental health It’s easy to find ourselves becoming less active right now. More of us will probably continue to work from home after the pandemic has eased, and right now there are fewer opportunities to get out and about while restrictions are still in place. But there are plenty of ways to keep active at home, including online workouts, fitness apps and yoga routines. Or, if you have a garden, you could give it a makeover. If you can manage to exercise outdoors, this can help boost your vitamin D levels – and simply feeling that you’re surrounded by nature can also help to raise your spirits

Accept that things change… and change what you can

Change brings challenges – this is just as true whether we’re talking about the changes brought on by the COVID-19 pandemic or any of the big events that form part of regular life. Small steps are the way forward. Be calm, be prepared, don’t try to take on too much – and don’t be afraid to ask for help. If you’re experiencing persistent symptoms, or feel worried about your mental health, do make an appointment with your GP

At this strange time we are all in the same boat, adapting to circumstances which are difficult for everyone.

Some people may be starting to return to work whereas others may still be working from home, either way it is important to look after your mental health.

Charlotte Ennis


Team No Comments

Blackfinch Weekly Market Update

Please see below for this week’s market update from Blackfinch Asset Management – received at lunchtime today.  

Blackfinch Group – Monday Market Update

In the ever changing world that we live in, we recognise the importance
of regular and current communication. This weekly news update from our
Multi-Asset Portfolio Managers provides you with a short summary of events
around the world which we hope you will find useful. 

Issue 6 | 1st September, 2020


• Speaking at the virtual Jackson Hole symposium, Governor of the Bank of England Andrew Bailey, states that central banks are ‘not out of firepower by any means’.

• Retail footfall in the UK rose by 4.1% from the previous week according to data from market research company Springboard. Retail parks have been the most resilient with numbers down only 10.6% from 2019 levels, whereas shopping centres and high streets have been hit harder, down 32.4% and 39.1% respectively.

• The Financial Conduct Authority announces that the option of a three-month mortgage holiday will end on the 31st October.


• Sunday 23rd saw the US report 34,600 new cases of COVID-19, down 17.8% from the number reported a week earlier.

• Progress appeared to be made in US/China trade talks, as officials continued discussions. Improvements are reportedly being made on key issues such as an increase in number of US products purchased by China, intellectual property rights, and a reduction of tariffs levied by the US.

• Jerome Powell, chairman of the Federal Reserve, spoke at the Jackson Hole symposium, announcing a new monetary policy framework based upon average inflation targeting. Powell stated that should ‘excessive inflationary pressures’ build, the central bank would ‘not hesitate to act’.

• US gross-domestic product (GDP) was revised up from an annualised rate of -32.9% to -31.7% for the second quarter of the year.


• Germany’s GDP reading for the second-quarter 2020 was revised upwards from -10.1% to -9.7%.


• Long-serving Japanese Prime Minister Shinzo Abe resigned due to ill-health. At eight years in office he is the country’s longest serving Prime Minister. He will remain in office until a successor is chosen by the Liberal Democratic Party.


• President Trump announces that his administration granted emergency use authorisation for COVID-19 treatment using blood plasma, although some medical authorities suggest that the data required to support the use of the treatment is still lacking.

• News from the US also suggests that President Trump is attempting to fast-track approval for the vaccine currently in development by Oxford University and AstraZeneca, with reports suggesting that approval could be granted before the presidential election in November.

• Cambridge University receives a £1.9mln from the UK government and plans to start clinical trials of its vaccine in autumn, or early next year. Representatives from the university claim that their approach will not only act as a vaccine against COVID-19, but is aimed at protecting humans from other related coronaviruses.

These articles are useful in providing a short summary of events from around the world over the past week.

Please continue to check back for our regular blog posts and updates.

Charlotte Ennis


Team No Comments

Brooks Macdonald – Weekly Market Commentary

Please see below the weekly market commentary from Brooks Macdonald – received 17/08/2020

Weekly Market Commentary | US focus shifts to presidential race as tensions with China ease

17 August 2020

Read detailed economic and market news from our in-house research team.

  • Weekly Market Commentary
  • COVID-19 updates

By Edward Park

  • US indices stop just short of all-time highs
  • Fiscal stimulus in the US is delayed as Congress’s focus moves to the presidential race
  • US/China Phase One talks postponed, easing fears of an imminent escalation

US indices stop just short of all-time highs

US indices have stubbornly stayed below their all-time high as delays to the US stimulus package dampened a more buoyant mood. Last week saw a steepening of bond curves globally which implies expectations of stronger inflation, and therefore higher rates, down the line.

Fiscal stimulus in the US is delayed as Congress’s focus moves to the presidential race

With the Democratic and Republican nominating conventions taking place over the next two weeks, markets will need to push back their hopes for a US fiscal stimulus package. This delay means unemployed Americans now see a significant fall in the federal support they receive as part of the COVID-19 relief measures. Given this is around 10% of the US workforce1, this may have a sizeable impact on consumer confidence and demand. This delay will likely put even greater focus on monetary policy in the short term. This week we have the publication of The Federal Open Market Committee (FOMC) minutes for July, where markets will be looking for any discussion on average inflation targeting by the US Federal Reserve. If inflation was taken as an average (rather than a single target), this would allow the central bank to let the economy inflate in the short term without immediately needing to curb monetary policy. However, if fiscal policy is delayed, the market will start to expect further proactive monetary stimulus from the US in lieu of targeted fiscal measures such as unemployment relief.

US/China Phase One talks postponed, easing fears of an imminent escalation

Investors were expecting a call between US and Chinese officials to discuss the Phase One trade deal this weekend. This did not transpire which has helped reduce fears of an imminent escalation between the two sides. This week however will focus on the US election, with the Democratic convention starting today. The main event will be Joe Biden’s speech on Thursday which is of major importance given his current lead over President Trump. Any specific comments around minimum wages, fiscal stimulus, healthcare reform and taxation will be closely watched.

With earnings season slowing, this week is likely to be predominantly driven by US politics as the presidential race increases in pace and US/China tensions remain in the background. US viral cases continue to slow but European countries have stepped up restrictions as governments seek to curb the spread across the continent.

The weekly market commentary articles are useful in providing a quick update regarding recent events from around the world.

Please continue to check back for our regular blog posts and updates.

Charlotte Ennis


Team No Comments

Legal & General – Asset Allocation Team Key Beliefs Blog

Please see article below from Legal & General’s asset allocation team – received 10/08/2020.

Legal & General Asset Allocation team’s key beliefs

American Express

This week, we take a tour of the United States – taking in the election, the economy, and the risk outlook for markets.

As with all Key Beliefs emails, this email represents solely the investment views of LGIM’s Asset Allocation team.

Biden: his time?

US presidential elections rarely lack drama, but it’s hard to recall one being carried out in such unusual circumstances as this year’s campaign. A few weeks ago it looked as good as it gets for Democratic candidate Joe Biden following months of terrible headlines for President Donald Trump, with polls and betting odds shifting in Biden’s favour. But then the polls stabilised and it seemed Trump was at his polling floor, making it difficult for Biden to gain more voters. With the potential for the news flow to normalise as new virus cases peak, the risks are skewed towards a tightening race.

The betting odds have barely moved, with the market average still giving Biden a 60% chance of winning. But polls have seen more movement, with Biden’s lead falling from an average of nine points to six over the past month. A few more polls in this direction and the narrative could escalate, pricing out some of the risk of a Democratic sweep.

The next major development is likely to be Biden’s pick for vice president. Betting markets suggest the contest is between Senator Kamala Harris and former national security advisor Susan Rice, with Senator Elizabeth Warren the only potentially market-moving – but low probability – option.

The focus then turns to party conventions over the second half of August. It remains to be seen how these translate as virtual events, how the press will cover them, and how voters will respond. Historically, a convention has given candidates a bump in the polls; they are likely to have a smaller effect than normal this time, but remain a wildcard, nonetheless.

Loan Concern

The US Senior Loan Officer (SLO) survey released last Monday night showed aggressive tightening across all categories, and by almost as much as during the financial crisis. The SLO survey has historically been a key metric for our economists in tracking bank lending standards, but how relevant is it this time round?

Lending standards tightened 2.8 standard deviations, not far away from the peak tightening of 3.4 standard deviations in October 2008. The tightening was broad based across all categories, with demand also weak for all loan types except mortgages.

But comparisons with 2008 are perhaps unfounded. Thanks to unprecedented support for corporate borrowers, strong bond sales have so far more than offset weak issuance of rated bank loans, meaning we are unlikely to see similar levels of bankruptcy, in our view – at least among companies with access to bond markets.

The key question is whether this tightening is bad news for the future or merely reflects a terrible second quarter. On the optimistic side, auto sales were not far from normal in July despite a huge apparent tightening in auto credit and very weak demand in this survey, while forward-looking housing market indicators look strong despite the tightening in mortgage credit availability in the second quarter.

The tightening nevertheless raises the risk that, without further large fiscal support, there will be economic scarring from bankruptcies as borrowers are not able to roll over loans. At a minimum, it is inconsistent with our most optimistic scenario which now will require some reversal of this tightening for the economy to return to trend growth by the end of next year. Employment data have also been mixed, with Friday’s non-farm payrolls just beating expectations following weaker PMI and ADP prints.

Risk Waiting

Last week saw us close out two of our more defensive tactical positions – long US Treasuries and short equities – following a cluster of near-term risks that appear not to have played out. New virus cases have slowed both in states that re-imposed harsh restrictions and those that did not, making further shutdowns less likely in the short term. Although we are seeing potential second waves in a number of other countries, nothing is spinning dramatically out of control, and vaccine news has added to a more positive tone of late.

In addition, incoming economic data last week had the potential to change the market’s assessment of what’s possible for growth over the next year, but have not proved to be a catalyst. And finally, concerns about US/China relations have so far failed to ignite. The South China Sea announcement came and went, while the forced sale of TikTok also seems unlikely to escalate tensions further.

This is not to say that all is rosy. Donald Trump may yet choose to fan the flames of Chinese resentment as an election tactic, while vaccine hopes and virus containment measures may not live up to the hype. As mentioned in previous editions of Key Beliefs, we now prefer to express our caution via selling investment-grade credit given the more stretched market positioning in that asset class.

A useful article from Legal & General’s Asset Allocation team on the United States election, the economy and the risk outlook for markets.

Please continue to check back for our latest updates and blog posts.

Charlotte Ennis


Team No Comments

Blackfinch Asset Management – Monday Market Update

Please see below for Blackfinch Asset Management Monday Market Update – received today 10/08/2020.

Blackfinch Asset Management – Monday Market Update

In the ever changing world that we live in, we recognise the importance of regular and current communication. This weekly news update provides you with a short summary of events around the world which we hope you will find useful. 


  • The UK Manufacturing Purchasing Managers’ Index (PMI) for July was revised down slightly to 53.3 from initial estimates, with numbers supported by an increasing domestic demand. The survey of members also showed increasing confidence, with 62% expecting production to be higher in 12 months’ time, whilst only 12% forecast a contraction.
  • The latest Services PMI number came in strongly at 56.5, up from 47.1 in June, moving back in to expansion territory.
  • The Bank of England keep interest rates on hold at 0.1%, commenting that they expect the economy will shrink by a fifth and unemployment will double by the end of the year as the furlough scheme unwinds.


  • Tensions between the US and China continue to escalate as President Trump announces a US ban on video-sharing, social networking service TikTok and multi-purpose messaging service WeChat.
  • The US jobs market appears to stall, with private payrolls adding only 167,000 jobs in July, against expectations of 1mln new jobs.
  • Weekly jobless numbers are, however, stronger than expected with first-time jobless claims falling by 249,000 to 1.2mln, ahead of expectations of over 1.4mln. Overall unemployment numbers also fell to 10.2% from 11.1% in June.


  • China PMI is reported at 52.8, ahead of consensus and further support for the existence of a strong economic recovery.
  • China’s exports were up 7.2% year-on-year after rising just 0.5% in June, with support from the textiles and electronics industries, not simply medical supplies which had dominated export numbers recently.


  • A rapid saliva-based COVID-19 antigen test in development by Avacta Group and Cytiva will receive clinical validation testing by the Liverpool School of Tropical Medicine.

Another useful article from Blackfinch Asset Management highlighting key events from around the world.

Please continue to check back for our latest blog posts and updates.

Charlotte Ennis


Team No Comments

Jupiter Asset Management – Active Minds Blog

Please see Active Minds article below from Jupiter Asset Management – received 06/08/2020

Summer warmth turns chilly for UK equities

In contrast to the warm, sunny weather in the UK at the moment, the UK equity market feels quite chilly and unloved in a global context, said Dan Nickols, Head of Strategy, UK Small & Mid Cap. The S&P 500 Index in the US is now up year-to date, while FTSE All-Share Index is down over 20% and the Numis Smaller Companies Plus AIM ex Investment Companies Index of UK small and mid-caps is down almost 18%.1

The reason why the UK has been so weak compared to other markets is partly compositional, as it contains fewer technology names, more financials, and more discretionary consumer stocks. Dan believes there is another layer too: the ongoing Brexit drama means that, for overseas investors, the UK can simply be filed under ‘too difficult’ and ignored for now in favour of other equity markets.

With an eye on the future, Dan is looking at real-time data around things such as credit card transactions, which indicate there was a good recovery until the end of June that then showed signs of slowing in July. Dan also highlighted a risk off unemployment picking up in the coming months, as the furlough scheme tapers off into a weak economy, bringing the importance of judicious stock and sector selection into sharp relief.

All of the above creates a challenging environment for UK equity investors. Dan highlighted that, in the UK small and mid-cap world, leadership in the market from a style perspective is very stark, as value continues to struggle badly while momentum, growth and revision factors remain relatively strong. Dan and the team are trying to navigate this by being purposefully overweight structural growth names, while tempering that with some exposure to what they believe are well-managed, conservatively financed stocks that are more geared into economic growth – although they have pared these back over the last few weeks, while retaining exposure to the stocks in which the team have highest conviction.

Large-cap tech stocks drive emerging markets

Emerging markets had a pretty good July, with the MSCI Emerging Markets Index finishing the month up around 3% (in sterling terms), noted Colin Croft, Fund Manager, Emerging Markets. Year to date, the index is almost flat, which is quite remarkable given the state of the global economy, said Colin.2  However, gains have been concentrated in a fairly narrow set of large-cap tech stocks, which now represent significant weightings in the index. These stocks are up significantly year to date, almost entirely driven by re-ratings, rather than seeing much in the way of earnings upgrades.

It is impossible to predict what the trigger could be for a change in the relative rating of these kinds of stocks. However, Colin suspects that as soon as there’s some sort of light at the end of the tunnel in terms of the pandemic, investors will want to take profits in these kinds of ‘haven’ stocks that have become so expensive, and could instead choose to move into stocks with more leverage to the recovery. It’s likely to be a bumpy road to get there though – for example, sentiment for recovery-dependent sectors such as financials and travel has been badly affected by a pickup in cases in countries that were previously looking much more encouraging, such as Spain and Australia. Elsewhere, the outbreak in Latin America shows no signs of abating – instead, it is plateauing at high levels.

Fortunately, there are some structural themes playing out that are more or less independent of the pandemic, highlighted Colin. One of these is the likely positive impact of the 5G rollout; another is the gas pipe reform we’re seeing in China. The latter has been under discussion for years, but finally some progress was made over the past month or so. Pipelines there were owned by the big three majors, which were also producers; however, now China is injecting all the pipe assets into a national company, which will then allocate the capacity in a strategic manner. Colin noted that this is happening on terms that have been surprisingly favourable to investors: they’re being injected at 1.2x or 1.4x book value; they’re also getting 40% cash payments for it, not just shares; and there’s talk about paying special dividends too.

Tech in the time of coronavirus 

The significant impact of technology across various sectors has been one key positive theme accelerated by the pandemic, says Makeem Asif, Fund Manager, Multi-Asset. Whether it is working from home, educating children online, retailers’ pivoting to online distribution or the need for more cybersecurity, the pandemic has led to a step change in the use of tech.

But, for Makeem and the global convertibles team, the biggest issue has been the valuation of some software companies where it is not unusual to see shares trade on 25x-40x revenues. In the semiconductor space, despite some initial supply chain disruptions, production in most factories in Asia is back on track. Earlier this week the semiconductor industry association published its monthly report which tracks sales and average selling prices of units. This highlighted how robust the semiconductor industry has been during the pandemic: in the twelve months to June, sales grew 7%, up from the 3% annual growth seen in May. The team expects chip sales to continue to rise driven by demand from data centres, autos, electric vehicles and other devices. In addition, says Makeem, such companies tend to have more reasonable valuations with good cashflow metrics.

In the fintech space, the hygiene requirements arising from the pandemic have acted as a catalyst to accelerate the uptake of digital payments with their clear advantage over cash. One of the dominant US card payment companies said it expected to reissue around 70% of its cards in the next 12-18 months. Although the switch to digital payments is not new, Makeem says there is still a significant amount of growth to come as some economies have been slow to adapt. Furthermore, there are still around 1.7 billion people worldwide who do not have a bank account.

1Source: FE, index returns in GBP to 31.07.2020
2Source: FE, index returns in GBP to 31.07.2020

Articles like this are useful for getting an insight to the market from market experts within their specified field.

The Coronavirus Pandemic has affected our lives in many different ways but as noted above a key positive theme has been the boost of the technology sector within the markets.

Please continue to check back for our latest blog posts and updates.

Charlotte Ennis


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Brewin Dolphin – Markets in a Minute

Please see below the latest market update article from Brewin Dolphin – received 04/08/2020.

Brewin Dolphin – Markets in a MinuteEquity markets mixed, gold and silver continue to rise

Global share markets were mixed last week, with China outperforming the rest of the world as its economic recovery continues. US indices were flat or marginally up thanks to some extraordinary results from the US tech giants, but equities in the UK and Europe have fallen on poor economic data, rising coronavirus cases and a “wall of worry” about the economic outlook later this year.

Bond yields broadly fell again with yields on US Treasuries hitting record lows, while gold and silver prices rose as investors looked for safe havens. Meanwhile, the US dollar suffered its worst month in 10 years against a basket of currencies.

A positive start to the week…

Markets started the new week with a rebound. Equities in the UK, Europe, US and Asia all pushed higher on Monday, as surveys of manufacturing businesses in the US, UK and Europe suggested that factory activity was increasing. The FTSE100 saw the largest daily increase, jumping by 2.3% on Monday, pushing back up through the 6,000 level to 6,032.85.

Virus developments

New cases appear to be slowing in the US, suggesting the pausing of re-openings and the mandated use of masks in many states may be working. It also saw a reduction in hospitalisations, and the fatality rate is now around 1.5% compared to 7% in April. This is probably because more young people are getting the virus while older people are taking more care to protect themselves, while treatments are also improving. All this helps reduce the chance of another national lockdown.

Unfortunately, after a period of falling cases, Europe is now seeing infection rates rise again, driven heavily, but not exclusively, by Spain (about 50%).

Japan has also seen a big rise and even China has seen a pick-up in new cases, albeit from a very low base. It demonstrates just how hard the virus is to completely suppress, but China is an example of how an economy can recover while managing localised outbreaks.

The news of two revolutionary new coronavirus testing kits that give results in 90 minutes will no doubt be a great help in containment efforts. Previous tests took two days.

What’s eating the dollar?

Even after falling so far last month, we suspect the trend remains weaker for the dollar. Despite the recent reduction in coronavirus cases it still seems as if Europe will do a better job of containment than the US, with governments generally prepared to impose local lockdown measures before things get out of hand.

Both regions have produced stimulus packages that are supporting growth, primarily consumption at the moment, which you might expect to be positive for the dollar. But it comes at the cost of an increased budget deficit (where government spending exceeds its revenues), and this will likely result in an increased current account deficit (where the value of its imports exceed the value of its exports). Both of these can weigh on the dollar.

Time is tight for US stimulus deal

The extra $600-a-week in unemployment payments announced as part of the original stimulus package in March, came to an end last week. Politicians are still deadlocked in negotiations about the details of a new stimulus bill, with Republicans wanting to cut the payments to $200 a week and Democrats wanting to keep payments unchanged.

All this while the employment crisis burns (as evidenced by another week of higher jobless claims). Even given the tight timeframe, with the Senate due to go into summer recess on 7 August, we still think a deal will be passed, even if it means having to push back the summer break. The alternative would be delaying until September which is an outcome that both parties would be keen to avoid.

Corporate news

Earnings season in the US has been producing the right kind of headlines. Around halfway through and nearly 85% of companies have beaten EPS estimates, ahead of the more usual 80%. Exactly two thirds of companies have reported better-than-expected sales levels. That is an improvement on most other years, when an average of 50% of firms exceeded sales expectations.

Last week saw updates from some of the big tech names. After announcing stellar results as beneficiaries of the new work and play at home environment, the combined market value of Facebook, Amazon, Apple and Google soared by $230bn in after-hours trading on Thursday, taking their total value to more than £5trn for the first time and lifting the S&P500 into positive territory for the week.

All that glitters…

The best play on a weaker dollar has been precious metals, and while the focus has centred on the gold price hitting record highs, silver has actually been the better performer of late, rising nearly 25% in July alone. We still think there is more upside because silver’s rebound has not yet fully reversed the historic divergence in the ratio between the price of the two metals, plus silver has additional demand for industrial uses.

Another good overview of the markets from Brewin Dolphin. Although markets started with a rebound this week, we are still experiencing high levels of volatility.

Please continue to check back for our latest blog posts and updates.

Charlotte Ennis


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AJ Bell Youinvest – The Growth of China’s Consumer Economy

Please see article below from AJ Bell Youinvest received 30/07/2020

The growth of China’s consumer economy

The country could stoke domestic demand to become more self-reliant

Thursday 30 Jul 2020 Author: Tom Sieber

In the last decade or more the Chinese economy has undergone a significant transition as it moves away from an infrastructure-driven and export-reliant economy to one fired by domestic consumption.

This change can be tracked by looking at how the country’s current account surplus has moved to a deficit. Broadly speaking a current account surplus means an economy is exporting a greater value of goods and services than it is importing.

Having peaked in 2008 when China truly lived up to its reputation as ‘The World’s Factory’ the surplus has declined significantly.

There are several factors underpinning the growth of the consumer economy, one being a natural offshoot of the maturation of the Chinese economy. A larger Chinese middle class is more likely to have disposable income to spend on products and services at home.

In the short term at least, exports have been hit by the coronavirus crisis as demand has dried up and trade routes have been affected by lockdown restrictions. Chinese tourists who might have taken their renminbi overseas are also shopping domestically instead.

There are signs China wants to move further in this direction as it looks to become more self-reliant. This may reflect pressure on the country and its businesses from other countries concerned about its growing global influence, and about its recent actions in Hong Kong and in the immediate aftermath of the Covid-19 outbreak.

A report by the Chinese Academy of Social Sciences, a think tank closely affiliated to the state, suggests the next five-year policy plan – due for 2021 – should prioritise home-grown innovation and look to tap into a substantial domestic market.

Please continue to check back for our latest blog posts and updates.

Charlotte Ennis