The Chancellor’s spring Budget: still waiting for a cure?; UK Housing Stable, London Faltering; Bitcoin more valuable than gold?; Snap Inc: The hottest IPO turns lukewarm as investors consider the future of advertising; Does waning Chinese stimulus threaten global growth?; Prospect Theory: the problem of ‘perceived performance’
The Chancellor’s spring Budget: still waiting for a cure?
Also, given that consumer spending and aggregate demand is facing inflationary headwinds and is set to tail off in 2018 and beyond, the Chancellor might have considered mitigating some of these challenges by means of targeted fiscal intervention. Moreover, by not acting or setting out some initial positive fiscal measures, the Chancellor appears to be signaling that future risks to the UK economy – from Brexit and otherwise – are skewed to the downside. We believe fiscal policy targeting higher tax receipts, whether income or consumption related, are likely to prove counter-productive in the current economic climate.
UK Housing Stable, London Faltering
We think that the London property market will continue to lag behind the regions in the short to near term, particularly as exporters in the regions begin to benefit from the fall in £-sterling. This will be especially true if global growth continues to surge ahead as it has been recently, upping demand for exports from the UK, which should feed through into wage increases in the regions relative to the capital. Meanwhile, real wages in London are likely to suffer more from the fall in £-sterling and the associated increase in inflation.
Bitcoin more valuable than gold?
For the first time in its short history, the US$ price of a single Bitcoin surpassed the price of a troy ounce (31.1g) of gold, with the digital currency topping $1,238.11 per ‘coin’ as the precious metal traded at $1,237.73. The apparent trigger for Bitcoin’s recent surge higher (in addition to capital flows from China) seems to be the looming decision by the US SEC (Securities and Exchange Commission) to approve the first ever Bitcoin ETF (Exchange Traded Fund). The odds of a yes or no in the next few weeks appear pretty even at the moment. A Bitcoin ETF could make it much easier for some investors to access the digital currency and improve liquidity.
Snap Inc: The hottest IPO turns lukewarm as investors consider the future of advertising
Advertising continues to evolve and new entrants like Snap think they can tap into a growing market and get brands to adapt to the rapid changes to reach the elusive younger demographic. For now, the experience of Twitter and its inability to capitalise on its early position to break into the ad market could play on the minds of investors for some time until more clarity arises.
Does waning Chinese stimulus threaten global growth? From our research partners Absolute Strategy Research by Peter Thal Larsen
If one overlays the rise in Chinese inflation on top of these growth numbers, the turnaround in nominal GDP growth is likely to have been dramatic. It has echoes of the post-financial crisis period, when a significant credit-driven stimulus in China made a major contribution to the recovery in global growth. We should not underestimate how important China has been in driving the sense of ‘reflation’ in the global economy. But, just as the 2009-10 economic recovery gave way to a period of more subdued growth once China’s stimulus started to be reined in, a similar relapse cannot be ruled out this time around.
Prospect Theory: the problem of ‘perceived performance’
We believe the two most important factors in getting around this emotional trap are choosing a portfolio that is appropriate for your risk appetite, and having a genuinely diversified portfolio. Having a foolproof investment strategy is all for nothing if you don’t stick to it and, in this sense, any risk-profiled portfolio can only be as good as your conviction to maintain it. Given the amplified emotional nature of losses compared to gains, the benefits of a well-diversified portfolio are evident. This is why we believe the Tatton investment ethos – avoiding asset classes that we believe are overvalued, rather than chasing returns by trying to guess ‘the next big thing’ – is effective.
Please click here to read the full Tatton weekly