Brexit, bond funds and black swans

The Noise

  • It doesn’t look like many traders took a summer holiday this year; August has been a highly volatile month in equity markets with sizeable daily swings throughout the entire period. But despite the negative noise, stocks have actually ground marginally higher over the month, led for the most part by US stocks.
  • The British Parliament upheld its long standing tradition of using obscure phrases to describe political machinations this week as Boris Johnson asked the Queen to “prorogue” (or in English, suspend) Parliament for five weeks. This further weakened the pound as it reduced MPs’ bandwidth to move against a “no deal” Brexit. 
  • Bond fund managers betting on a rise in yields have been sorely hit this week and indeed for a good part of the year, Ray Dalio, Dan Invascyn and Michael Hasenstab have all been caught on the wrong side of the rates trade, with the latter in particular trouble thanks to a hefty position in Argentine debt.

The Numbers


The Nuance

By reading market headlines you wouldn’t necessarily have believed that markets had been moving upwards in recent weeks, albeit erratically. But this is the conundrum that investors are facing; the macro risks are big and ugly but businesses can still borrow cheaply and invest in growth. Indeed, low rates are starting to look like a permanent feature of capital markets. Furthermore, while the last two recessions that we have faced have been akin to “black swan” events, the risks we face now are perfectly well flagged. And whether you’re a FTSE 100 CEO or a fund manager, you’ll already be preparing your business or your portfolio for the possibility of a tougher economic environment.

Good businesses are adaptable even in the hardest of times, so having the headline risks laid bare means that contingency plans are relatively straightforward. The US and China trade war means that businesses are having to contend with supply chain uncertainty, which sounds worrying but is worth putting into context. Before the tsunami in Japan in 2011 a huge number of businesses around the world were highly (and some completely) reliant on Japan for component parts. They had to find new ways to diversify their supply chains overnight, and they did. Corporations around the world learned the hard way that it is of vital importance to avoid overdependence and to diversify geographically, just as we do with our own portfolios.

Quote of the week 

“Just because it’s in space doesn’t mean it’s not subject to law” Mark Sundahl, director of the Global Space Law Center at Cleveland State University
Decorated American NASA astronaut Anne McClain can add another claim to her list of accolades; she has become the first person in history to be investigated for an alleged crime committed in outer space. She is accused of identity theft and improper access to an individual’s private financial records, after logging in to her ex-wife’s bank account while aboard the International Space Station.


Please navigate to a service or product page and add the document to your brochure to continue.

Name your brochure
Your details
Thank you!

Your brochure is on its way.

Brochure Confirmation - your brochure is on its way.

We hope you find this useful.

The value of investments and any income from them can fall and you may get back less than you invested.