Strategic Updates

We elaborate on the four factors that will dominate the ramp-up to the U.S. presidential election: power politics, the election aftermath, central bank posturing, and Covid-19 dynamics.

I’m deviating from my usual quarterly format, primarily because events warrant an update. Since I last wrote just eight weeks ago, we’ve gone through a number of Covid-19 induced changes. The most visible fallout is on the economic front, where GDP contraction and employment loss remind of the Great Depression.

Covid-19 has made the world into a new place. Not just “out there”, but in our homes and workplaces. From here on, we’ll be doing many things differently, maybe for a few months and maybe for decades to come. It’s important to understand how we got here.

In this issue, we review a year in which markets—against all expectations—continued to advance, against an exceptionally challenging background. We also look ahead at 2020 and beyond, considering key political, economic and social issues, both at home and globally.

America’s executives and board members have sold a combined $19 billion of stock in their companies through to mid-September. If we annualize that, it puts insider sales at a two-decade high.

It’s interesting that the date of this communication should fall on America’s Independence Day, because America is once again my central topic—not by design, but by default.

Once again, predictably and on time, the U.S. Federal Reserve and the European Central Banks, have shifted gears. After talking tough for most of the past year, the world’s key monetary agencies have softened their stance.

As I wrote three months ago, the stock market has for some time been a risky place to be. Yet, with few exceptions, financial columnists, the talking heads on television, and the major investment firms sang the same chorus—the economy, they chirped, is doing just great and a major correction is months, perhaps years, away.

It’s ten years since Lehman Brothers collapsed and the financial world unravelled. We entered the crisis with cash reserves that seemed alarmist, but helped us weather the storm and be able to stock up on quality equities after their precipitous drop.

A new world order, without America at the head of the table, is in the making. We examine why even Washington’s allies are finding it difficult to relate to the world’s lead power.

Inflection points in narrative are highly important markers. Technically, the stock market is still in a bull market and no one can know when a deeper correction will unfold.