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Contents Click on the links below to get to the stuff you really really want. USA – Stock prices hit new records; Mortgage applications drop suggests short-term trouble; Bond yields have steadied (#USA) UK – Stocks and pound up on another uncertainty being removed; Inflation up but still very low (#UK) Continental Europe – Stocks up with Daimler’s upgrade lifting car makers (#Europe) Elsewhere – Stocks up on more stimulus and lower dollar hopes (#Elsewhere) WTF – First visit (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
Stocks climbed to new records in the US yesterday as folk latched onto the latest musings from Janet Yellen and co about more fiscal stimulus. The inauguration of a new and uniquely dull president also seemed to settle concerns over political turbulence.
But there are still concerns over the near term with mortgage applications being the latest source of data suggesting that the US economic recovered is stalling. On top of that, stock prices, especially in the technology sector, are at incredibly high price/earnings ratios. In other words, they’re mighty expensive. I would not be buying the likes of Tesla right now as it has risen ridiculously high in my opinion.
For a more sober view of the landscape I turn, as I so often do, to the world of bonds. So grey, it could have been elected president. The demand for and prices of benchmark bonds have steadied after some recent shuffling about. Folk have expressed their optimism for a post-pandemic world, but now we need to get there. Yields on benchmark 10-year Treasuries (US government bonds) have dropped a little and are trading relatively steadily at around 1.08. That’s a good deal higher than the pre-vaccine levels, but way off the pre-pandemic highs of around 2.0%.
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UK
While Biden was sworn in and Trump sworn at, UK investors were jumping on board for the “ding dong the witch is dead” jamboree. The FTSE 100 and FTSE 250 closed 0.4% and 1.4% higher. The value of the pound also rose, reflecting hopes that the UK economy would benefit from various uncertainties being slowly chalked off (avoiding no-deal Brexit, US political stability, delivery of US financial stimulus).
As we know and love, the FTSE 100 is full of companies that generate most of their revenue overseas, so a higher value to the pound creates a short-term knock on sales or profits, and that brings their share prices down.
On the macro-economic front, inflation was up from 0.3% in November to 0.6% in December, despite the latest lockdown measures. Clothing and transport costs appear to have been the driving forces of the rises. The target rate is 2.0%, and I can’t see the Bank of England fretting too much if it exceeds that while the economy is getting back on track (and huge debts are eroded by inflation).
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Continental Europe
Stocks on the continent were similarly boosted by the general feel-good factor. The Euro Stoxx 50 and German DAX both closed 0.8% higher on the day with technology and consumer goods stocks leading gains. Daimler got an upgrade from HSBC following its delivery of efficiency and an improved outlook. That pulled various other car producers up as well.
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Elsewhere
Stocks across the Asia Pacific region are leaping merrily through the meadows of happiness as the prospects of more financial stimulus emanating from the US and a lower value to the dollar generally make their prospects worthy of delight.
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WTF (What’s The Fact?)
First visit
There are betting sites offering odds on which country Biden will visit first. He claims to be Irish in the way that only fully fledged US citizens seem to insist on doing.
Regardless, I’m looking forward to when he, the oldest US president, meets Queen Elizabeth, the oldest British monarch. The two of them can be wheeled out for a game of dominoes and a glass of sherry if they behave.
Liz would appear to be the oldest living head of state at the moment (I say “appear to be” because I’ve not verified the facts, not because she looks slightly cadaverous – that’s Biden’s gig).
The second-oldest resigned last year: one Mahathir Mohamad, the geriatric would-be dictator of Malaysia. He banned me and a bunch of my colleagues from visiting Malaysia in the 1990s because one of our colleagues had published the truth about graft in a section of the Malaysian government. It was a bit like being told that you can’t visit Hemel Hemstead. You don’t really lose a great deal of sleep over it.
Apparently Peterborough is more boring despite, the Mirror says in its defence, “it having a sizeable population”. Prisons have sizeable populations, but that doesn’t attract me to become a resident.
Anyway, Biden’s in and still seems to be breathing.
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Links
Investopedia (www.investopedia.com/dictionary/) – Loads of free explanations of financial terms including some helpful videos. Not 100% accurate, but a good starting point Guffipedia (ig.ft.com/sites/guffipedia/) – Lucy Kellaway of the FT has collected some painful examples of corporate people disappearing up their own analogies Guardian (www.theguardian.com) – Free to access website with a couple of decent columnists (e.g. Nils Pratley and Larry Elliott) Times of India (timesofindia.indiatimes.com) – Why use five words when 37 will do? Daily Mail (www.theatlantic.com/magazine/archive/2016/07/the-war-on-stupid-people/485618) – Click it. I dare you.
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———————————————————— IMPORTANT This is my opinion. Yes I read a lot and share what I’ve read with you, but this content remains my opinion. It’s NOT advice. If you take my advice – don’t take my advice. Any decisions you make about investments, your hairstyle or whether or not to eat marzipan are entirely at your own behest. If you’re unable to recognise the devil’s ear wax when you see it, then you’re on your own.
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