Uncertainty looms surrounding the result of a proposed US stimulus bill. House Speaker Nancy Pelosi was in discussions with Treasury Secretary Steven Mnuchin yesterday to attempt to resolve blockages caused by Republican push-back concerning the size of the bill. Markets have slipped this week in response whilst the US dollar has weakened against most major currencies.
In July, EU leaders agreed to set up a €750bn recovery fund to help the bloc alleviate the economic stresses caused by the Coronavirus; the agreement heralded the first time that the EU would undertake collective borrowing. This week has seen the first issuance of these bonds under its Support to Mitigate Unemployment Risks in an Emergency (SURE) programme. Demand for the bonds has been extremely strong, with orders totalling €233m; the implications for the dynamics of EU debt markets remains to be seen.
Both Ireland and Wales have entered “fire break” lockdowns, closing non-essential retailers and requiring the populous to stay at home for two weeks. After failing to reach an agreement with local leaders in Manchester, Boris Johnson’s government has enforced Tier 3 restrictions on the region. Manchester will not be receiving the £65m financial support it was lobbying for, led by Greater Manchester Mayor Andy Burnham.
Against a backdrop of political uncertainty and still no signs of optimism in Covid-19 case numbers, investor confidence seems to have moderated for the first time in weeks. Market sentiment continues to swing around, allowing us to lean against short-term trends to make sensible incremental decisions.
Market weakness in September allowed us to make just these sort of adjustments, buying into good companies where short-term market sentiment had driven down prices. As valuations pulled back, the return potential for these high quality businesses improved, allowing us to allocate more capital to the positions. Some of this return potential was realised in October as portfolios were rewarded by subsequent market strength.
With the US election looming, a stimulus deal which seems unable to make ground and Covid-19 cases rising, uncertainty is rife and markets are unlikely to make anything other than moderate progress in the short-term. As such, we are once again leaning against the trend and using market strength to pare back positions which we judge to have run ahead of medium-term business prospects.
Quote of the week
“You’re spoiling our fun." "We should be having the time of our lives.” Nottingham Trent students
With tuition fees, accommodation, and “extra-curricular spending”, a University education does not exactly come cheap. So it’s fair to say that an additional £10,000 cost probably wasn’t a welcome surprise for four Nottingham Trent University students this week. The students were fined £10,000 each after throwing a party despite Coronavirus restrictions as the city is currently in Tier 2. After reports from community support officers, the group were approached by police. The students claimed that everyone had left but upon further inspection, officers found more than 30 people hiding throughout the house. Nottinghamshire Police reported that the students accused them of "spoiling their fun" – and told police that they should be having the "time of their lives".
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