SBM Finance

18/07/2023

🚨 MARKET UPDATE 🚨

Market sentiment is improving as the US economy shows signs of a slowdown. This is leading to expectations of a soft landing, where the Fed can bring inflation under control without causing a recession.

In the US, stock markets are rallying and short-term Treasury yields are falling. The dollar is also weakening, as investors favor other currencies with higher interest rates.

A soft landing would be a positive development for the global economy. It would reduce inflation in other countries and take some pressure off central banks to raise interest rates.

However, there is still a risk of a recession. Core inflation is still high, and interest rates may need to remain higher for longer than expected.

Europe is facing a different set of challenges. The ECB is expected to raise interest rates by another 25 basis points, and the UK is expected to see at least 1% more between now and early 2024.

Investors should remain diversified. While the US economy may emerge from the current interest rate cycle relatively unscathed, stock market valuation favors the Old World. The UK FTSE 100 looks particularly cheap.

Financial history demonstrates that diversification delivers the best long-term risk-adjusted returns.

For the full market update, refer to our website below:

A soft landing beckons for the U.S, and the relief is palpable on global financial markets. A weak June ISM Manufacturing survey was followed, ten days ago by a weak non-farm payroll report. Last week we had further confirmation of a slowing U.S economy, with lower than expected June inflation numbe...

12/07/2023

• Investors wait for the current inflation and interest rate cycle to turn
• Russia/ Wagner Group…careful what you wish for!
• Core inflation - central banks stick to the plan
• The return of the 60/40 portfolio

Investors are waiting for core inflation to end before they make any significant moves. European and Japanese stocks appear to offer value relative to the US market, and bonds are a good way to reduce risk in a portfolio.

The mutiny by the Wagner Group has had little effect on financial markets, but it is an admission by Putin that his power is not absolute. Central banks are sticking to their plan to squeeze out core inflation, which will likely lead to a rise in unemployment. However, this is necessary to bring inflation down.

The 60/40 portfolio approach to portfolio investing is once again valid. Bonds have become more volatile, but they are still a good way to reduce risk in a portfolio.

In conclusion, investors are waiting for core inflation to end before they make any significant moves. European and Japanese stocks appear to offer value, and bonds are a good way to reduce risk in a portfolio.

To read the full market update, refer to our website below:

Waiting for core inflation to end. Last week’s rate central bank rate hikes in Europe, and accompanying statements, re-iterated the message from the U.S Fed of the week before: core inflation remains sticky, and interest rates may peak at higher levels than had been expected. This increases the ri...

15/05/2023

• Global stock markets consolidating
• Market returns to pricing in Fed cuts later in the year
• Bond markets more apprehensive of U.S recession
• China’s 5% growth target under pressure
• Sterling up…and taxes?
• Some ideas on boosting U.K growth

Global stock markets are consolidating and holding onto year-to-date returns, with investors pricing in a soft landing for the US economy, confident that the Fed can bring down inflation without inducing a recession. However, bond markets are more apprehensive of a US recession and are showing caution. China's 5% growth target is under pressure due to slowing demand for its exports. The pound has a fair wind behind it, reaching year and six-month highs, helped by better than expected growth and public finances, with further interest rate hikes expected. Finally, Rishi Sunak and Jeremy Hunt's workable deal with Brussels over Northern Ireland/G.B trade has given an additional boost to sterling.

To read the full market update, refer to our website below:

Stock markets are consolidating around levels seen a month ago, holding onto decent year-to-date returns. Investors appear to be pricing in a soft landing for the U.S economy, confident that the Fed can bring down inflation without inducing a recession, and that a fresh global economic cycle will st...

01/05/2023

Positively Calm?

• Confidence returns to stock markets
• Bond investors are more skeptical
• Tech stocks are surprisingly robust
• UK inflation, interest rates, and a temporary rally in sterling

The stock markets have been enjoying a month-long rally, while major bond markets have inverted yield curves, indicating a recession is ahead. However, investors may already be placing bets on the economic recovery that will follow any recession, and should remain diversified using multi-asset funds. The outlook for interest rates is for one more 25bp rate rise from the Fed, with two more 25bp rate hikes expected in the UK. Tech and other growth sectors have shared in the broader stock market gains, with the largest U.S tech stocks sitting on large cash piles reducing their need to borrow money to fund investment and growth. The UK inflation numbers were disappointing, with money markets pricing in two further rate hikes from the Bank of England, supporting sterling against the dollar. However, other factors, such as relative growth and a deteriorating export sector, work against it.

To read the full market update, refer to our website below:

Stock markets are calm, and enjoying a month-long rally. This suggests that confidence in the outlook for profits and dividends growth is returning. And yet core major bond markets continue to be marked by inverted yield curves, which suggest recession is ahead. However, the apparent discrepancy may...

05/04/2023

Trendless. (5th April 2023)

-A trendless market, but investors retain risk appetite
-Stock markets benefit from reasonable valuations and lower bond yields
-The bank crisis, and oil production cuts, confuse the inflation picture
-Inflation: tax payers vs bond holders

Market sentiment: Trendless. Investors, like central bankers, face a confusing array of issues that will impact on stock, bond, and cash returns. However, the strong performance of U.S tech stocks in March indicates that investor risk appetite has not been diminished by the recent bank crisis. The likelihood continues to be for a new global economic cycle to start late this year, when the Fed begins to cut interest rates.

Given the large sell-off seen on many stock markets last year, stock market valuations are not stretched (indeed, in the U.K share prices look cheap on most measurers). This, together with the recent fall in bond yields in most major markets, gives stock markets protection should troubles emerge elsewhere in the financial system over the coming months.

In view of the multitude of issues facing investors, a diversified, multi-asset portfolio that purposely limits exposure to any one particular asset class looks like the best approach. Financial history demonstrates that such a portfolio tends to deliver the best returns relative to the risk (ie, volatility) taken.

What are the confusing array of issues? Prior to the March bank crisis, it was said that central banks faced a dilemma. They can raise interest rates quickly, to bring down inflation, and risk a recession (some described the risk as that of ‘killing the patient you are trying to save’). Or they can protect economic growth, by taking a more gradual approach to interest rates, and risk inflation becoming embedded through higher wages. The approach taken has different effects on asset classes; after a slow start the major central banks took the aggressive approach from last March, leading to falls in stock and bond prices over the year.

Central banks now have a quadrilemma (how else to describe two additional dilemmas?!). The bank crisis, and the decision by OPEC+ to cut production by 1.1 million barrels per day (p/d), must also be taken into account as they wrestle with the problem of when to stop raising interest rates. But are these deflationary problems, or inflationary?

Bank crisis adds complexity. The Fed has argued that the recent bank crisis is potentially deflationary, as banks become less willing to lend and anxious to harbour cash. Jay Powell, chair of the Fed, has implied that interest rates may not have to increase as much as previously expected, because of this.

But if the response to the recent crisis, and presumably any further problems to emerge, is to shower the financial sector with liquidity, to prevent a systemic crisis emerging, then central banks are in a curious position. They are tightening monetary policy with one tool (interest rates), while easing it with another (emergency cash injections into the financial system).

Can a central bank manage both a financial crisis and an inflation shock at the same time? If that isn’t migraine inducing…

OPEC+ bring further problems. On Sunday Saudi Arabia agreed to cut crude oil production by 500,000 p/d, along with 600,000 p/d reductions in output from other members of the OPEC+ group of oil producers. Nervous of falling prices, as the outlook for global growth weakens, the group wants to stabilise prices by reducing output. This led to an immediate $6 jump in Brent, to $86, and oil stocks around the world rallied. Goldman Sachs have a new price target of $95. Is this inflationary, or deflationary?

Higher energy costs risk raise headline inflation, and yet discourage economic activity, and so are deflationary in the medium term. When energy prices began rising in 2021, central banks argued that, since they could do little to affect the oil and gas price, it was pointless raising interest rates in response. To do so risked exacerbating the downturn in economic activity that higher energy costs bring. If we do see energy once again become part of the inflation problem, will the central banks stick to that line?

The problem is that last time the inflation shock lasted longer, became broader, and was more severe than expected (exacerbated by lock-down induced supply side bottlenecks). But if central banks claim that they have learnt lessons from 2021/22, and raise rates in response to higher energy prices, investors may fear monetary over-kill - and a perhaps severe recession.

Inflation: taxpayers vs bond holders. Inflation can help the tax payer, in the broadest sense. The IMF, in its latest Fiscal Stability report, has highlighted the benefit to government finances of inflation. To the individual tax payer, inflation can feel exploitative. Governments often respond by not raising allowances in line with prices, so taking more tax revenue through the process named fiscal drag. But the IMF has highlighted how the inflation of recent years has benefited the tax payer in the general sense, to the cost of bond investors.

First, inflation lifts the nominal GDP of a country, but the amount of outstanding government debt is unchanged. This helps reduce debt to GDP ratios, which have fallen from 99% in 2020 to 95% in 2022, and in Italy from 142% to 135% over the same period -despite the large increase in budget deficits to pay for the Covid pandemic. Lower debt to GDP ratios allow for more borrowing in the future, should the need arise, without markets becoming unduly anxious.

Second, while tax revenue is lifted through fiscal drag, government spending is less sensitive to inflation, and takes time to catch up. This is illustrated by the public sector strikes taking place in the U.K at the moment: many are striking to have their real wage restored to what they were in 2010, before a decade of wage restraint and, more recently, a bout of high inflation, ate into their real value.

These are, however, one-off gains. Bond investors have now adjusted their interest rate expectations and are demanding more interest, adding to the cost to the government of running large deficits. And public sector workers are becoming militant, often with the support of the general public, forcing -in the U.K at least- some compromises by the government.

17/03/2023

Possible Scenarios For Capital Markets (17th March 2023)

-Uncertainty abounds, investors should remain diversified
-Three scenarios for capital markets as the Fed ponders what to do
-UK budget – the welcome sound of grown-ups speaking

Market sentiment: Uncertain. The risk of a major bank collapsing as a result of the failure of three U.S banks over the last 10 days (Silvergate, SVB and Signature), appears limited. Common Equity Tier 1 ratios are generally robust (meaning the banks have the capacity to absorb large losses), and the quality of assets held is much higher than it was in the run-up to the global financial crisis. And yet…Credit Suisse shares are falling again, despite its 14.1% CET 1 ratio*, and global investors are nervous that further surprises await them.

The effect is likely to be reduced risk appetite in the weeks ahead. Good for bonds, commodities and safe haven currencies such as the Swiss franc and the Japanese yen, but not so good for higher-risk parts of the stock market, such as growth companies and emerging markets. Financials look a little risky in the near term, with good names liable to be sold off with the weaker ones if we do see contagion in the bank sector.

However, chasing near-term winners is dangerous. Financial history suggests investors should remain invested in a diverse portfolio of assets (ie, bonds, equity, real estate etc), to maximise returns relative to the volatility (risk) of the portfolio. And should short term tactical bets prove necessary, an active fund manager is better placed to make them than a non-professional.

Three scenarios as to how the Fed, and financial markets, might respond to the SVB failure. There are perhaps three schools of thought regarding how the Fed might respond to the Silicon Valley Bank (SVB) failure. We will know more next week, when it next meets to set interest rates. But for now, it is interesting to think through the scenarios, and how they may impact on financial markets.

Job done. The Fed, having ridden into town with the Federal Deposit Insurance Corporation (FDIC), has put in place measures to prevent further bank runs. The FDIC has promised all individual bank deposits are insured, while the Fed will swap Treasuries at par value (though their market value may be below par), so banks can have ready cash.

The Fed can say ‘our job is done’ regarding the banks, and vow to resume its war on inflation with a 25bp rate hike next week. There is no doubt that the war needs to be fought: yesterday’s climb in core CPI inflation, to 0.5% month-on-month, confirms a picture of stubborn inflation in services, driven by wage growth.

If this scenario plays out, we can expect short-dated Treasury yields to rise, long-dated perhaps less so. The 2yr/10yr inverted yield spread to return to the 1% level of a week ago. Stock markets will go back to waiting for a new global economic cycle to kick in late 2023/ early 2024, perhaps starting to price this in from the summer. Let’s give this 50% probability.

Preventive medicine – and no major upset. The Fed decides that its rate hiking days are over, fearing macroeconomic instability if it persists with rate hikes. What other troubles may be exposed by higher interest rates? Something else lurking in the U.S regional, or European, bank sector? Or perhaps in the ‘shadow banks’ of money market funds, private equity, hedge funds?

In this scenario the Fed consciously trades macroeconomic stability for higher inflation. It will hope to be able to return to its war on inflation at a later point, before inflation becomes an embedded problem. The U.S, and indeed the global economy, returns to pre-global financial crisis rates of inflation and interest rates as the Fed and other central banks eventually their 2% inflation targets.

But there is no major upset to the global economy, the Fed’s precaution proved unnecessary (or perhaps helped prevent an upset).

In this scenario, we can expect a steepening Treasury yield curve. Long-dated yields will rise on the threat of inflation being seen as an acceptable price to pay for macroeconomic stability. Short-dated yields may not move at all, held down by Fed assurance that the terminal interest rate of the current cycle has been reached. Stock markets will benefit from the prospect of a looser monetary policy than expected, and from the receding risk of an earnings recession. But tech and other long-duration, ‘jam tomorrow’, sectors may underperform as the long-term cost of borrowing increases. Perhaps 30% probability?

Preventative medicine- but an upset occurs. Scenario 2), but this time there is a major upset to the global economy. Banks restrict their lending, as they fear counter-party risk and their own ability to raise emergency cash. Recession follows.

In this scenario, which currently seems the least likely, government bonds rally as recession equals unemployment, and the likely end of core inflation. Treasuries, bunds and other ‘core’ government bond markets also benefit from their safe haven status. Stock markets fall, though the high yielding defensive sectors, such as utilities, pharma, consumer staples, perform relatively well. A 20% probability.


U.K budget – the welcome sound of grown-ups speaking. Chancellor of the Exchequer Jeremy Hunt is surely right in viewing bottlenecks in the labour market as barrier to growth. He has today announced measures aimed at bringing disabled people back into the workforce, and to encourage young mothers to return to their careers he has announced a reform of childcare subsidies.

For the over 50s there are significant reforms to pension rules, to encourage workers with large pension pots to remain at work. The annual tax allowance for tax-deductible contributions will rise from £40,000 to £60,000, and the lifetime allowance of £1.07 is being replaced with…no limit at all! Hunt couched this reform as a benefit to the NHS, by referring to the need to keep highly experienced doctors at work. That was to disarm the opposition Labour Party. In fact, the reform will benefit all workers.

Despite near record low unemployment of 3.7%, the economy is barely growing thanks in part to the disappearance of around 300,000 workers from the labour market since the pandemic began. There are 1.1 million job vacancies. The policy reforms announced today will help alleviate the bottlenecks. They are a surer way of improving economic growth than the expensive across-the-board tax cuts announced in last September’s ill-fated budget, by then Chancellor Kwasi Kwarteng.

01/03/2023

Check out our latest reviews on TrustPilot by clicking the link below:

https://www.trustpilot.com/review/devere-acuma.com?search=Sam&sort=recency

01/03/2023

Profit taking, Higher FTSE, Inflation and Interest rate Discussions Persist (1st March 2023)


-‘A year of two halves’ remains on track
-Is the record stuck?
-Strong economic data can not defy rate hikes forever
-U.K recession/ Norther Ireland protocol, sterling and small cap stocks


Market sentiment: A little weaker, as a rise in bond yields triggers profit taking on global stock markets. The scenario outlined in the Investment Outlook in January appears to be on track: a year of two halves, characterised by a bumpy first half of the year for stock markets, as inflation and interest rate worries persist, followed by a rally as central banks cease raising interest rates and investors start pricing in a new economic cycle.

New highs on the FTSE 100 (which recently touched 8,000), indicate that investors remain confident regarding ‘jam today’ quality companies, that trade at relatively modest valuations. The FTSE 100 index has plenty of these so-called value stocks, in sectors such energy, materials, financials, pharma and insurance.

Is the record stuck? Cliches are being rolled out to explain the sell-off in February in macro-economic terms. ‘Good news is bad news’ is the most popular, ie: blame strong economic data, especially in the U.S, but also in Europe, for increasing interest rate expectations, and so depressing stock market valuations. Interest rates and, probably, bond yields, will both be ‘higher for longer’ than was expected.

This may be the case, but one also suspects that the urge to take profits, in both stock and bond markets, is playing a part. Not least, to recoup losses made on both markets in 2022.

This is not deny that recent U.S economic data has been strong. The most cited is still the astonishing 517,000 new jobs figure for January three weeks ago, three times higher than expectations. Other more recent data has confirmed the strength of labour at present, with fewer than expected new unemployment claims reported last week. January retail sales stronger than expected.

In addition, the Fed’s favoured measure of inflation, the PCE index, climbed last month on both a year-on-year and month-on month measure. The risk is that strong wage growth makes core inflation an intractable problem in the major western economies. The Fed, the ECB and the Bank of England have all made clear their anxiety over strong wage growth. However, few central bankers wish to openly criticise pay awards, for political reasons.

It increasingly looks like the Fed has perhaps 0.75% further to go, rather than just 0.5%, and the likelihood of a rate cut at the year end is diminishing. In the U.K, one final 25bp hike in March is expected (taking the benchmark rate to 4.25%).

Strong economic data cannot defy rate hikes forever. Central bank monetary policy is notoriously slow to take effect. It is said that changes in interest rates take a year to 18 months to feed themselves into the broader economy. Given the large number of interest rate hikes over the last 18 months across the developed world (Japan the notable exception), it would be astonishing if we did not see a marked slowdown in employment growth and demand in the U.S and Europe over the coming months, and a role-over in services inflation.

A short, shallow downturn before the recovery. As the macroeconomic news starts to deteriorate we can expect an increase in corporate profit warnings, with possible signs of stress emerging in credit markets.
However, the economic downturn that is likely to kick in over the coming months is expected to be relatively short, and shallow, in the U.S and euro zone. The relatively weak downturn will be thanks to a number of factors:

First, employment levels are expected to remain high, even as output falls because of higher financing costs. Companies are keen to hang onto staff, having found it so hard to recruit over the last year. Second, banks are in good shape in the U.S and Europe, with plenty of capital in place should defaults from mortgages and other loans increase. Third, the re-opening of China will support global demand.

All of which suggests retaining existing exposure to stock markets, and ignoring near-term volatility.

U.K recession/ Northern Ireland Protocol. The U.K is likely to be the one major economy in which a recession this year will lead to a decline in overall GDP over calendar 2023 (the IMF have calculated a 0.5% shrinkage). One domestic policy that might improve this outcome would be an easing of the trade barriers the U.K imposed on itself by leaving the E.U. It is to hoped that U.K Prime Minister Rishi Sunak can soon do a deal with the E.U over the Northern Ireland Protocol, which will then lead to progress in other areas held back by Brexit -such as reducing paperwork on exports and imports between the U.K and the E.U more generally. A trade deal with the U.S is more likely, if Congress is satisfied that the Northern Ireland Protocol cements, rather than undermines, the Good Friday Agreement.

Another beneficiary of smoother relations with the E.U will be sterling, which has carried a Brexit discount since the 2016 ‘Leave’ vote. However, this may be muted due to the contrast in Fed and Bank of England policies over the coming months. The interest rate gap between the two is expected to widen, to favour the dollar, as the Fed implements several more rate hikes in the spring while the Bank of England stops in March. U.K small cap stocks are more sensitive to domestic economic conditions than FTSE 100 stocks, and would benefit from any simplification to exporting into the E.U’s single market.

Investors should remain diversified. Investors should remain diversified in multi-asset portfolios, that offer exposure to equities, bonds and alternative asset classes. Holding cash is tempting, but it suggests an ability to ‘time the market’, to invest it at an optimum point in the cycle. Experience suggests this is very hard to achieve consistently.

11/02/2023

Conflicting Data and Inflation Decreasing! - "In some places" (11th February 2023)


-Investors digest a substantial amount of economic news
-U.S Corporate results: a mixed bag
-FTSE 100 reaches new highs
-E.U and U.S green subsidies – more than just about the environment.

Market sentiment: Risk appetite remains strong. Recessions in the Eurozone and the U.S may well be avoided, as inflation falls over the coming months and central banks end their interest rate hikes. Labour markets are robust, supporting demand. This suggests that corporate profits, and dividends will not be hit as much as had been feared just six weeks ago, when the macro-economic outlook appeared worse.

But central banks remain wary of core inflation (headline CPI inflation excluding energy and food), which is proving stubborn. The war on inflation is not over yet, as Jerome Powell of the Fed, and Christine Lagarde of the ECB, said last week, using almost identical wording to warn investors they may have to price in higher terminal interest rates than they are currently expecting.

Reassuringly, the riskiest assets have held onto their January gains despite the warnings on rates from the central banks. The tech-heavy NASDAQ is up 15% since the start of the year), while Bitcoin is up 37% to $22,731. Investors seem prepared to look through any near-term squalls on inflation and interest rate news.

Investors digest a substantial amount of economic news. The Fed, ECB and Bank of England all raised interest rates last week by the expected amount (25bps for the Fed, 50bps for the ECB and BoE). Investors were reassured that, while warning that terminal rates may be higher than currently priced in, neither the Fed nor the ECB are interested in over-doing the rate hikes. To use an a popular analogy, neither want to risk tackling a high temperature by killing the patient, as happened in the late 1970s/ early 1980s in much of the industrialised world.

The Bank of England went further, suggesting that its rate hike, which raised its key rate to 4.0%, may be the last one in the current cycle. The outlook for the U.K this year is one of shrinking GDP and increasing taxes. The IMF’s latest economic outlook, released last week, sees the U.K being the only major economy to suffer recession this year, with GDP down 0.5% in 2023 (it had forecasted an expansion of +0.1% in October). World GDP is expected to grow by 3.2%, up from 1.9% in 2022 but still well below the average between 2000 and 2019 of 3.8%.

The U.S labour market remains tight, with a much higher-than-expected 517,000 new jobs created in January, and unemployment falling to a record low of 3.4%. There is anecdotal evidence of employers unwilling to fire staff, despite weaker demand for their products, for fear of being under-staffed when the economic cycle picks up. Sure, Big Tech has announced the firing of large numbers of staff in recent weeks, releasing skilled people. But these are being snapped up by all industries eager to expand/improve their I.T capabilities. The tight labour market is a headache for the Fed, as it contributes to strong wage growth. However, Fed Chair Powell made clear last week that embedded inflation (caused by wage growth) is not yet a problem.

U.S Corporate results: a mixed bag. With half the S&P500 companies having reported their results so far, the data services company Factset estimate that the average fall in Q4 profits, over the same period of 2021, will be around 5.3%. This is calculated using the actual numbers of the companies that have announced so far, and consensus estimates from analysts of those yet to report. This is a relatively modest fall in profits, given the rapid pace of interest rate hikes since late 2021. Industrials and energy have outperformed, while consumer discretionary, consumer services and tech are the worst performing.

Last week saw Apple, Amazon and Alphabet all release weak numbers, amid warnings of decelerating revenue growth and promises to reduce costs. Meta drew attention away from a 4% fall in profits, and 55% fall in profits, by announcing a cut in its R&D budget on ‘metaverse’ inventions and a $40bn share buy-back program. Its shares bounced.

Globally, banks are benefiting from increased net interest margins, as they pass higher interest rates onto lenders while only modestly offering depositors better rates. Energy companies are reaping a ‘Putin dividend’, which brings with it renewed demands from some voters, in some countries, for a windfall tax on the sector.

FTSE100 reaches new high. Helped by record profits from Shell and BP, and solid results from banks, insurers, and consumer staples, the FTSE100 sits at a record high (7,941 as I write). The Bank of England’s hints that its rate increases may have peaked have also helped lift the index, although more than two thirds of its companies’ revenues originate overseas. With an expected dividend yield of 4.1% this year, and dividend payments generally well covered by earnings, it appears cheap by comparison with, say, the S&P500, and it is attracting overseas buying.

E.U and U.S green subsidies – more than just about the environment. E.U leaders meet today and tomorrow for a two-day summit. A key topic will be how the bloc should respond to President Biden’s $370bn package of Federal subsidies, for clean energy projects, announced last August in the Inflation Reduction Act (IRA). Of course, the name of the act is bizarre: increasing state spending, at a time of high inflation, will do nothing to bring prices down.

But the real problem with the program is that it distorts global investment in green energy. It is already sucking in projects from around the world, helped by a thicket of additional state and local tax breaks and subsidies. Europe and Asia risk losing their technology base in this sector, as their leading companies shirk Paris, France in favour of Paris, Texas. The result could be that the U.S and China dominate clean energy, able to charge monopoly prices in their spheres of influence.

Hope amongst European and Asian countries, that clean energy might help power their own technology renaissance, would be dashed. In response, last week the E.U announced that member states may offer a total of Euro 250bn tax credits and subsidies to their green sectors.

On the table at the Brussels summit are proposals to develop E.U ‘national champions’ (an idea France is particular keen on), and a relaxation of E.U state aid and competition (anti-trust) laws. Smaller E.U states fear E.U national champions will come from the larger countries, which will also offer outsized tax breaks that tempt away their own tech companies. They will have done to them by France, Germany etc, what the U.S is doing to Europe.

Many politicians in E.U member states have never felt easy with the free-market Anglo-Saxon culture that the U.K forced onto the European corporate landscape during its period of membership. They welcome the excuse to return to a more cosy (and opaque) relationship between big business and politics. The irony is that they can point to the U.S, as the example that they are following.

The U.K government is also placing a lot of hope in the green energy sector. But it has been muted in its criticism of the IRA, as it seeks Washington’s blessing on the revised Northern Ireland Protocol. Britain’s unilateral tearing-up of the original Protocol deal with the E.U angered Biden, and united Congress against proceeding with a U.K/U.S trade deal.

Investors should remain diversified. Investors should remain diversified in multi-asset portfolios, that offer exposure to equities, bonds and alternative asset classes. Holding cash is tempting, but it suggests an ability to ‘time the market’, to invest it at an optimum point in the cycle. Experience suggests this is very hard to achieve consistently.