Fed loosening provides much needed stability

15 November 2019

The Noise

  • US billionaires and a number of economists are on the attack following Democratic presidential hopeful Elizabeth’s Warren’s proposed wealth tax plan. Goldman Sachs senior chairman Lloyd Blankfein was among the most vocal of critics who took to twitter to denounce her plans to impose a 2% tax on every dollar of a person’s net worth over $50m, and an additional 1% on every dollar in net worth over a billion dollars. Warren is currently a front-runner in the 2020 race to the White House.

  • Even though the US trade talks with China have stalled somewhat, markets are still taking comfort in the Fed’s willingness to keep monetary policy loose in the face of sustained low economic growth rates, and in the fact that PMI numbers in key economies have started to stabilise.

  • In corporate news, Disney unveiled Disney+ this week, officially entering the highly competitive and ever-changing streaming market, setting its stall against incumbents Netflix and Amazon Prime. The service attracted over ten million subscribers in two days.


The Numbers


The Nuance

Market concerns over a recession have now started to ease. Sustained loose monetary policy is doing just enough to keep the economy ticking along at an acceptable rate, and PMI numbers in key economies across the world are starting to look ever so slightly healthier.

We expect growth to return to long-run trend rates; moderate but stable. From an investment perspective this once again puts an emphasis on selectivity, while a rising tide lifts all boats, slow growth means that only companies that innovate and adapt are likely to drive returns for shareholders. Furthermore, central banks keeping rates lower for longer means that zombie companies – those that are able to survive only by guzzling on cheap debt – will be able to limp on for longer, making it doubly important to make sure that you’re investing only in solid companies with strong balance sheets, innovative product lines and good management teams.

Quote of the week

UCAT is an alternative that will negotiate a Brexit deal which is kinder on pets and which sticks two paws up to Johnson and the likes of Jacob Rees-Moggy. Peter Cook, anti-Brexit campaigner

For those who thought that the state of British politics could sink no further, we introduce the latest candidate launching a bid to win a seat in Parliament; Stan the cat. The so called “anti-Brexit” cat, owned by campaigner Peter Cook, has officially launched a bid for the constituency of Gilingham and Rainhim in Kent. Cook plans to represent the animal himself in Parliament.

Source: theweek.co.uk

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