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Blackfinch Group Monday Market Update 30/08/2021

Please see below for Blackfinch Group’s latest Monday Market Update Article, received by us yesterday 31/08/2021 due to the Bank Holiday:


  • Recruitment company Hays warned of “clear signs” of skills shortages worldwide and said hiring woes were pushing up wages in some hard-hit sectors. It also noted salaries are rising in certain industries as employers seek to attract and retain staff, particularly in the technology and life sciences sectors.
  • British car factories produced the fewest cars for any July since 1956 as they struggled with worker absences and the global shortage of computer chips. UK carmakers made 53,400 vehicles in July, a 37.6% drop when compared with July 2020, according to data from the Society of Motor Manufacturers and Traders (SMMT), the industry’s lobby group.


  • The Chair of the US Federal Reserve (Fed), Jerome Powell, expressed concern about rocketing COVID-19 infections and was cautious on when it would start easing back on its stimulus programme. Powell’s remarks were far less hawkish than some Wall Street analysts had expected, and had a positive instant impact on the financial markets.
  • A new survey from the University of Michigan showed weakening US consumer confidence. Its consumer sentiment index fell from July’s final reading of 81.2 to 70.3 in August, the lowest recorded since December 2011.


  • Rising prices, and the increase in COVID-19 cases, have knocked consumer confidence in Germany, the eurozone’s largest economy.
  • Figures released by Destatis showed that the German government’s efforts to fight the pandemic saw its budget deficit expand  by €80.9bn in the first six months of 2021. That’s equal to 4.7% of GDP, and the highest reading since 1995.


  • Sentiment was weighed down by weaker-than-expected August Purchasing Managers’ Indices (PMIs) from China. The non-manufacturing PMI fell to 47.5, the first sub-50 reading since February 2020 (a sub-50 reading represents a contraction), which was below the 52.0 expected and down from 53.3 in July. Several factors were behind the slowdown, including further lockdowns to control the spread of the Delta variant, flooding in some regions, and ongoing regulatory changes that have impacted domestic wealth.

Please continue to utilise these blogs and expert insights to keep your own holistic view of the market up to date.

Keep safe and well

Paul Green DipFA


Team No Comments

Invesco: Emerging markets, China, and the road ahead

Please see below for one of Invesco’s latest investment articles, received by us yesterday 07/07/2021:

A year and a half after the first reported cases of a new SARS-like virus in Wuhan, China, we can now look back with greater clarity on a period of some of the most dramatic volatility since the Asian and global financial crises. Here, we assess what this volatility and the associated policy responses have meant for China and emerging markets and plot a dotted line for the road ahead.

Looking up after locking down

At the time the pandemic hit, the unresolved US-China trade war loomed large and global manufacturing was in the early stages of restructuring to accommodate new trade patterns. Despite this, China stood out from other countries in terms of its fiscal, monetary and industrial policy response.

Beijing’s policy decisions focused on maintaining domestic productivity and employment with as little disruption on the demand side as possible. Manufacturers were given liberal access to capital to maintain operations, and refunds on social security tax and unemployment insurance incentivised businesses to retain staff without layoffs.

At the same time, the central bank lowered its reserve requirements and removed blocks on certain loan extensions and renewals. Investments were made in traditional infrastructure projects like housing and transportation, and spending on the nationwide 5G network was accelerated.

As a result, China moved from having a GDP contraction of almost 6% for the first quarter of 2020 to being the only major world economy to print a positive GDP growth number for the year.

A dolorous relationship?

While China’s growth in 2020 is unmatched, the road ahead is not unwinding, particularly when we consider the impact that US policy decisions could have on the US dollar.

The growth of the US fiscal balance sheet in 2020 (accommodated via easy monetary policy) appears to have stimulated real inflation in the US economy – an outcome which has led to talk of tightening. If asset purchase programmes are tapered or rates increased, the likely outcome is a stronger dollar.

Historically, a strong dollar has been negative for emerging markets, as it increases the burden of US dollar-denominated debt. This is less of a factor today than it was prior to the Asian and global financial crises. However, the fact remains that this could dampen growth prospects in some emerging market economies.

Commodities buck the trend

In spite of the observation noted above, it is likely that a stronger dollar will benefit firms selling commodities into US dollar-denominated markets, as long as there is global demand for these products. This factors into the dramatic outperformance we have seen from steelmakers, iron miners, commodity chemical companies, and even coal producers.

The demand behind this outperformance is not part of the same super-cycle seen after China’s admission to the World Trade Organisation, when investment in capacity and infrastructure facilitated the country’s transition to the so-called ‘world’s factory’.

Even when we account for the fact that some of this capacity has moved to other countries in the context of trade realignment, the overall demand for commodity materials is not in the same league as two decades ago.

Instead of a broad, sustainable growth in demand, we are seeing a short-term build-up of inventories that reflects ‘new normal’ uncertainties about tariffs and pandemic lockdowns. This goes all the way through the product cycle, from raw materials to finished goods.

Although these dynamics are almost certainly near-term and should subside in the medium-term, they do attract speculation that disrupts the market.

The road ahead

What does this disruption mean for emerging markets? In the absence of significant inflows, there is a conservation of capital within the asset class. The sharp and transitory shifts described above get funded by parts of the market that have outperformed — in this case growth companies, in particular those in China. In this sense, China has been a victim of its own success as far as its response to the pandemic is concerned, as some investors look to lock-in potential gains.

That said, in our opinion, these sharp transitions do not signify a change in the long-term view for emerging markets. The types of firms that create and capture value for shareholders remain the same.

Even with an ageing population, China remains a large economy with an outlook for sustained, high-speed growth. The growing middle class offers opportunities for investment in education, real estate services, and world-leading innovative technology platforms that facilitate consumption.

It is worth adding that the size and scale of the domestic market should make it less susceptible to external volatility than other markets in the asset class.

What these transitions offer, then, is the potential to invest in the best long-term opportunities at more attractive valuations than normal market conditions afford. 

Please continue to utilise these blogs and expert insights to keep your own holistic view of the market up to date.

Keep safe and well.

Paul Green DipFA


Team No Comments

Blackfinch Group Monday Market Update

Please see below for the latest Blackfinch Group Monday Market Update received by us today 21/12/2020:


  • Talks continued in the hope of finding a solution in the Brexit negotiations.
  • Data showed redundancies hit a record 370,000 in the third quarter of the year, with the unemployment rate rising to 4.9%.
  • UK inflation slowed again in November, to 0.3% from 0.7%, with prices weighed down by retailers cutting prices during ‘Black Friday’ sales.
  • The Bank of England voted to leave interest rates on hold and revised its expectations for the decline in gross domestic product in the fourth quarter, from 2.0% to a “little over 1%”.
  • UK retail sales fell 3.8% month on month in November, although economists had predicted a decline of more than 4%.


  • Talks continued over a further stimulus package, with the deadline fast approaching.
  • The Electoral College ratified the November presidential election result, with each state voting in line with their electorate to confirm the upcoming inauguration of Joe Biden and Kamala Harris.
  • US retail sales fell further than expected in December, declining 1.1% month on month.
  • The US Federal Reserve announced it will buy at least $120bn of bonds each month until substantial further progress is made towards its maximum employment and price stability goals.
  • First-time jobless claims data came in above expectations in the week to 12th December, climbing to 885,000.


  • The Bank of Japan extended its virus-related corporate lending programme by six months to September 2021, while making no changes to its monetary policy.


  • The US began its vaccination programme, with the first three million doses of the Pfizer/BioNTech vaccine distributed for use across all states.
  • The US Food and Drug Administration approved the vaccine developed by Moderna for emergency use.
  • News broke of a new variant strain of COVID-19 that has become prominent in London, the South East and Eastern England.

These articles provide concise well-informed views that cover the whole of the market and are useful to maintain your up to date view of the markets globally.

Please keep reading our blogs regularly to give yourself a holistic and up to date view of the markets.

Keep safe and well.

Paul Green


Team No Comments

Blackfinch Group Monday Market Update

Please see below for the latest Blackfinch Group Monday Market Update received by us today 02/11/2020:


  • Infection rates continued to climb, with talk of a second national lockdown becoming more prevalent towards the end of the week
  • According to the Confederation of British Industry, retail sales fell in the year to October. The group surveyed 116 firms, of which 54 were retailers, and highlighted a loss of momentum from September
  • The Bank of England (BoE) entered consultation with UK banks about the potential for allowing them to resume paying dividends
  • Data from The British Retail Consortium showed that prices in UK shops fell by 1.2% in October, after falling 3.2% in September. Prices for non-food items also fell 2.7% month on month
  • Net mortgage borrowing increased to £4.8 bn in September, from £3.0 bn in August, according to the Bank of England. Mortgage approvals for house purchases reached their highest level since September 2007, at 91,500


  • House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued to be unable to reach an agreement on a stimulus package
  • Latest gross domestic product (GDP) figures showed that the US economy grew by 33.1% in the third quarter, following a fall of 31.4% in the second quarter. Expectations had been for an increase of 32%
  • In the week to 24th October, new jobless claims fell to 751,000, better than forecasts of 770,000
  • Daily new infection cases reached record highs, with over 100,000 infections reported on 30th October
  • New home sales fell short of consensus, with 959,000 sales reported in September, below expectations for 1.03 bn homes to have been built


  • France, Spain, Germany and Ireland all imposed further restrictions on movement in a bid to slow rising infection rates
  • The European Central Bank left rates unchanged. Head of the bank Christine Lagarde suggested there was ‘little doubt’ that the bank would act in December to loosen monetary policy further
  • GDP across the region increased by 12.7% in the third quarter, ahead of the 9.4% growth expected. France, Spain, Germany and Italy all posted forecast-beating figures


  • South Korea GDP grew 1.9% in the third quarter as compared to the previous quarter
  • The Bank of Japan made no changes to its monetary policy settings, as expected. However, it did trim its growth forecasts to reflect sluggish service spending through the summer months


  • The UK’s Medicines and Healthcare Products Regulatory Agency announced that it has started accelerated reviews of the vaccines in development by both Astrazeneca and Pfizer. This is in the hope of enabling the UK to approve the first potential jab as quickly as possible

These articles provide concise well-informed views that cover the whole of the market and are useful to maintain your up to date view of the markets globally.

Please keep reading our blogs regularly to give yourself a holistic and up to date view of the markets.

Keep safe and well,

Paul Green


Team No Comments

Active Minds: China’s recovery drives Asian bull market

Please see below for Jupiter Asset management’s latest ‘Active Minds’ article received by us late on the 22nd July 2020:

Jason Pidcock

Head of Strategy, Asian Income

China’s recovery drives Asian bull market

The bull market in Asia continues, noted Jason Pidcock, Head of Strategy, Asian Income. We’ve seen lots of large index constituents in China and Hong Kong rallying sharply, with some reaching all-time highs. Some people may find this a bit ironic given the negative political news coming out of China and Hong Kong, but this hasn’t prevented capital from flowing into those markets. Jason highlighted that this isn’t just in terms of domestic inflows – foreign capital is also buying Chinese and Hong Kong stocks.

What’s really driving Asian equities is the V-shaped recovery in China’s economy, said Jason. China is in a better position than many other economies, with second-quarter GDP up 3.2% year on year, following a contraction of 6.8% in the first quarter. So, it’s on track with expectations for a full recovery from the decline sometime in the second half of the year. Lots of Chinese businesses are doing well, too. Companies are forecasting profit growth and they’ve got strong balance sheets. While many parts of the world are seeing dividend cuts, many Chinese companies are not cutting dividends, and furthermore, many are actually growing their dividends, partly because of their net cash positions.

There’s been minimum impact from recent geopolitical tensions on Hong Kong, too. The UK symbolically suspended its extradition treaty with Hong Kong and placed it under an arms embargo, and the US has officially removed Hong Kong’s special trade status. Economic impact will be quite minimal though, as it should only affect about 1% of Hong Kong’s total exports. The Hong Kong dollar peg is unlikely (and technically difficult) to change, and capital flows into Hong Kong have gone up sharply since the announcement of the drafting of the National Security Law at the end of May. Hong Kong has had to lock down the economy to a degree because of a new flare up in virus cases, but most people are seeing this as temporary; it’s not having a big impact on most of the larger-weighted stocks listed there.

Overall, Jason expects to see Asia Pacific equities continue to trend higher; within the region, it’s Northeast Asia that’s driving growth.

Chris Smith

Fund Manager, UK Growth

Why aren’t supermarkets making more profit?

The UK has been the worst performing major developed market year to date, said Chris Smith, Fund Manager, UK Growth. That in itself isn’t so remarkable, as the UK has lagged behind major global peers for much of the last five years, but Chris said that the magnitude of the underperformance has accelerated in 2020. The reason for this is partly because the UK stock market has a larger exposure to structurally challenged or cyclical sectors, such as oil majors and financials, than many of its peers, and not much of a technology sector.

So, if the UK market faces so many challenges, where can a stock picker investing in UK stocks look for opportunities? Chris used a couple of examples to illustrate where he does, and does not, find attractive stock ideas in this environment.

At first glance, supermarkets seem like one of the winners from the Covid-19 pandemic, registering record like-for-like sale growth in many cases as shoppers stockpiled ahead of lockdown. Chris, however, sees them as structurally challenged ‘old world’ businesses. Despite that record sales growth, supermarket profits are forecast to be broadly flat year-on-year in the UK. This is because the increased sales were focused on low margin staples, and office workers, tourists etc staying at home means supermarkets are selling far fewer high margin items such as ‘on the go’ convenience food and drink. Online deliveries have gone up significantly, but this also has a dilutive effect on margins, as purchases are again focused on low margin items and the costs of fulfilling orders are higher than for in-store purchases.

Ultimately, Chris doesn’t see supermarkets as an attractive long-term investment for a growth investor like him. More attractive, however, is the testing and certification industry. It is essentially an oligopoly, with three major players all experiencing strong organic growth across the cycle from 2006-2019. The industry is also exposed to a lot of long-term structural growth trends, such as more regulation, higher safety standards, ESG in the supply chain, and cybersecurity, among others.                           

Richard Watts

 Head of Strategy, UK Small & Mid Caps

UK midcaps – go where the growth is

Richard Watts, Head of Strategy, UK Small & Mid Caps, also discussed the UK’s recent underperformance, noting that the domestically-biased FTSE 250 Index is down around 25% year to date, which is significantly worse than the 16% decline of the more international FTSE 100 Index.

In turn, the UK stock market is trading at a 25% discount to its long-term average against the broad global equity market as represented by the MSCI World Index. This valuation trough is at its lowest since World War II, so it does look cheap. The UK market has also hugely underperformed relative to where government bond yields are so, in Richard’s view, the market looks very good value.

Part of the malaise is down to the weakness of the pound and its volatility against a backdrop of Brexit uncertainty in particular hurting many midcap stocks, which collectively are more exposed to the economically-sensitive parts of the economy (housebuilders, engineers, travel companies, pubs and restaurants) than the FTSE 100 Index. More recently it has also reflected the outlook for dividends, as many companies had to cut dividends or cancel them to access government support schemes.

In the small and midcap strategy, Richard and the team have been overweight in structural growth for some time – it’s been clear that the pandemic has greatly accelerated the shift towards online retailing, pulling forward some two to three years of growth. This is having a very positive impact on the earnings of such companies and the strategy. And it’s no surprise that the team is underweight in travel, store-based retailers, pubs and restaurants, as they think consumers are still very nervous. This can be seen in the number of restaurant table bookings (not) being made. The team expects pub like-for-like sales to be down around 40% year-on-year, so they are wary of having too much exposure to these areas. Instead, they are seeking economically-sensitive exposure through those businesses that they believe will emerge from the crisis in better shape and which are not reliant on consumer spending where, in their view, it will take time for confidence to recover.

Joel Ojdana

Credit Analyst, Fixed Income

Don’t miss the double-B boat

Double-B credit offers great opportunities in today’s US high yield market, said Joel Ojdana, Credit Analyst, Fixed Income. Classed as the better-quality end of high yield credit, these businesses are well suited to the ‘new normal.’ In a world where negative real rates imply a slow global recovery, and with enormous debt at both the corporate and sovereign level likely to dampen productivity, these better-quality balance sheets and businesses should benefit.

Unprecedented support from the Federal Reserve also continues to drive spreads tighter, said Joel, and has opened up a financing window to corporate borrowers that is not at all typical during a ‘normal’ recession. With more monetary support expected by the market, BB-credit spreads are likely to further compress, in Joel’s view, offering a great opportunity. That said, it’s important to discriminate, because the pandemic has created both winners and losers within the US high yield segment – the Technology and Utilities sectors have outperformed year to date, while the Energy and Transport sectors have plummeted, for example. Finally, BB-rated corporates also frequently issue 10-year bonds, which is typically the longest duration in the high yield market and therefore should offer the most potential upside if spreads do tighten further.

These articles are useful for breaking down input into sectors, allowing experts of their particular sectors to offer insight within their specified field. This facilitates an all-round view of the markets.

Please keep reading these blogs to keep your own view of the markets up to date.

Keep well and safe

Paul Green