Chart of the Month

March 2020


Source: Thomson Reuters Datastream
 

The last week of February recorded one of the worst weekly returns in the history of US equities. However, in the past 30 years, investors have made money, on average, if they bought equities following a week of negative returns. The exceptions are the years 2002, 2008 and 2018 (but losses were minimal in 2018 with average weekly returns of -8.4bps). The popular strategy of buying the equity market dips has worked well – except when there is a recession brewing! 
 

February 2020

Source: Thomson Reuters Datastream
 

By most reckonings, the US labour market is at its tightest since the 1970s yet the usual improvement in government finances is strangely absent. If the economic cycle is mature, as we suspect, then even larger deficits will unfold in the next couple of years. As the yield on 30-year bonds dips under 2 per cent, the ability to fund a larger US budget deficit is not in doubt. The same cannot be said of the capability of fiscal policy to revive the economy.


 

January 2020


Source: Thomson Reuters Datastream

There is a gaping chasm between the reported confidence of US consumers and company CEOs, which has an eerie likeness to the 2006-08 period. Maybe, since October, corporate executives have lifted their mood as global interest rates have fallen, central bank balance sheets are growing again and US-China trade tensions appear to be easing. Or maybe, CEOs are battening down the hatches and consumers will discover all too soon that their expectations will not be fulfilled.

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