Hello everyone; it’s been a while since I’ve had the time to put my thoughts down on virtual paper and, now that we are returning to post-Summer normality, regular service can be resumed. Either way, welcome to this week’s News, Views and Truths…
The big news from last week and rolling over into this week and beyond is the fallout from the most recent US employment figures. And the word used is ‘disappointing’.
Although the data released last Friday confirmed that 235,000 new jobs were created in the month previous, this was well below the expectations of 720,000 and this total – the worst since January – delivered heightened fears of the rise of the Delta variant in the States and the impact that this could have on the recovery of the US economy.
This was evidenced in leisure and hospitality jobs, which had been the prime driver in employment gains during 2021, at an average of 350,000 new positions being created each month. Instead, professional and business services led the way with 74,000 new jobs, followed closely by transportation and warehousing with 53,000.
However, the main impact of this data is the effect it will have on the decision making of the US Federal Reserve.
All eyes are on the Central Bank and their signalling of the current astronomical level of asset purchasing, which has provided so much liquidity and support to global markets during the pandemic. This so-called “tapering” is, according to the Fed, entirely data-dependent; with the most important element being employment levels, bringing last Friday’s numbers into focus.
Previous to Friday, US Central Bankers had expressed optimism regarding the trajectory of data and USD economic recovery, with market speculation pointing to a possible September tapering. However, there is no doubt that this latest data disappointment will shelve these plans, perhaps even pushing back tapering plans until 2022.
And that, ladies and gentlemen, is seen by many market participants, as a positive. A continuation of Federal Reserve asset purchases provides huge levels of liquidity to the market and therefore continues to be positive for assets. We are in a perverse situation where bad economic data could be reflected in positive asset price movements, as the economic life support remains.
But it will stop at some point and speculation will continue to be rife as to when. Investors should be looking towards this, preparing for a change in regime and how this will alter how assets perform. And we haven’t even mentioned inflation.
Either way, it’s back to reality.
If you haven’t watched last week’s investment video, you really should. I speak to Hugh Gimber, Global Strategist from JP Morgan in London on how they are viewing current market conditions, with a specific focus on the Central Banks and what considerations investors should be giving to this – it can be found here.
This week’s video is already in the can; I have the huge pleasure of talking to James Sym, manager of the River and Mercantile European fund and we discuss the huge investment opportunities across the continent and how his rather differentiated approach to ESG investing (Environmental, Sustainable, Governance) is generating excess returns for investors. And if you have not yet signed up to our Youtube channel, you are really missing out, so sign up today!
Finally, we have received requests, nay demands, to reinstate the weekly music playlist. And never let it be said that I do not take feedback onboard! So, to finish, a playlist with the title “Return to Normality”. Have a great week and I shall see you all in seven days, if not before.