Economic and Political Monthly Roundup

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A collation of recent insights on markets and economies taken from the comments made by chairmen and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.

Roundup

It was a case of ‘wait and see’ as the US election drew nearer and a number of European states re-introduced restrictions in an effort to try and limit the damage from the pandemic’s second wave.

Global

Resilience outside the Americas and Europe

Ben Lofthouse, manager of Henderson International Income, looks at where the most pronounced positive activity has been in global equity income. He concludes that there are clear signs that we have suffered the worst and an improvement should be seen going forward.

UK

Recovery will be bumpy

Chelverton Growth’s manager, David Horner, says there is a feeling that, once a trade agreement with the EU is in place, there will be a release of pent-up demand.

Mercantile’s co-managers, Anthony Lynch and Guy Anderson, are fairly sanguine in their outlook, noting that economic lead indicators suggest an encouraging recovery.

Andrew Impey, chairman of JPMorgan Smaller Companies, reflects on the reasons why the recovery in UK markets has stalled. While plenty of uncertainty still permeates, Andrew says a chunk of this is priced-in.

Unemployment is likely to rise leading to more precautionary saving 

Jupiter UK Growth’s manager, Richard Buxton, says that unemployment will rise and precautionary savings likewise. He expects the recovery from the suspension of economic activity will be a bumpy one, and that capacity will be lost or curtailed to match weaker demand.

Jonathan Brown & Robin West, managers of Invesco Perpetual UK Smaller Companies, note that a reduced level of consumer spending during the lockdown has, in aggregate, strengthened household finances. The managers do not expect the full scale of job losses to be fully apparent until the various national furlough schemes have ended.

Algorithmic trading has been adding fuel to market volatility

M. Foster, J. Harrison, and J. Dieppeof, managers of Investment Company, believe it is highly likely that extreme market volatility, driven by ever-increasing levels of algorithmic trading, will be a feature of markets until the pandemic is brought under some form of control.

Ken Wotton and Adam Khanbhai, managers of Strategic Equity Capital, note that the indiscriminate impact of the pandemic has started to flow through to the ‘real economy’ with a 20.4% fall in UK GDP in Q2. The managers also make that point that, whilst the current situation is uncomfortable, history has found that uncomfortable times are often good times to invest in equities.

Europe

The recently established European Recovery Fund is seen as potentially providing a major boost

Stefan Gries and Sam Vecht, managers of BlackRock Greater Europe, make a case for feeling more optimistic about their outlook for Europe than they have done in many years. The newly established European Recovery Fund is a key factor behind this. They believe that the EU could emerge from the crisis in a more unified state, arguably helped by Brexit.

Ollie Beckett, Rory Stokes and Julia Scheufler, managers of TR European Growth, are similarly upbeat in their assessment. In their view, the policy environment is as constructive for equities as it has been for some time.

The ‘green economy’ is benefiting from a growing awareness of the environment around us, which the pandemic reinforced 

Jamie Ross, manager of Henderson EuroTrust, goes over a number of the structural changes that have emerged and been accelerated over the pandemic. Jamie also says that one of the less obvious impacts of this crisis will likely be a growing awareness of the environment around us, and the realisation that how we treat our environment is inextricably linked to our prospects in the future.

Asia Pacific

Returning US-listed Chinese companies is boosting Hong Kong

James Will, chairman of Asia Dragon, discusses why Asia’s appeal remains undimmed. He also highlights that, after social unrest and the pandemic unnerved investors in Honk Kong, the market is being bolstered by returning US-listed Chinese companies.

Nigel Cayzer, chairman of Aberdeen Standard Asia Focus, touches on India and Thailand, which have been hit harder than most. With respect to dividends, Nigel says that dividend yields in Asia appear more resilient than other regions.

Dividends in Asia have held up more resilient than other regions

Pacific Assets’s chairman, James Williams, notes that while East Asian countries seem to have fared better than elsewhere during the pandemic, the political backdrop also remains turbulent. James cites Chinese military activity in the South China Sea, the Himalayan border with India, and the imposition of the new Security Law on Hong Kong as factors that long-term investors could do without.

Other

We have also included comments on the flexible investment sector from JPMorgan Multi-Asset; North America from Jupiter US Smaller Companies; Japan from Schroder Japan Growth and Baillie Gifford Japan; the global emerging markets sector from JPMorgan Emerging Markets, Genesis Emerging Markets, and JPMorgan Global Emerging Markets Income. Vietnam from VinaCapital Vietnam Opportunity and VietNam Holding; Thailand from Aberdeen New Thai; debt sector funds from UK Mortgages and Secured Income Fund; private equity from ICG Enterprise; hedge funds from Gabelli Merger Plus+; infrastructure from Infrastructure India; UK property from Alternative Income REIT, PRS REIT, and Target Healthcare REIT; and global property from Ceiba and Macau Property Opportunities.

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November Economic and Political Roundup