The noise
- PM Rishi Sunak and Labour’s Keir Starmer took to the stage on Wednesday in the latest Prime Minister’s Questions and in the first one since his autumn statement was announced. The two party leader’s debated the state of the economy and other challenges facing the future of the economy.
- The UK Supreme Court rejected Scotland’s independence referendum ruling which means that the Scottish Government cannot hold a referendum without the consent of the UK government.
- Major Purchasing Manager Indices were released this week, with European Manufacturing indices beating expectations despite being in contraction. Output across the UK fell for the fourth month in a row, adding to fears that we have already entered into an extended recession.
The numbers
GBP performance to 24/11/2022.
The nuance
Some relief on the inflation front has given investors hope that the battle may be drawing to a close. Equities have continued to stage a rally, supported by cheaper valuations and surprising robust earnings reports. Estimating the timings of economic and market cycles is an inexact science but it looks like the economic recession is a third the way through and the bear market halfway through.
Periods of market euphoria and bubble-type mindsets entice people to speculate based on the perception that assets always rise in price and speculators cannot lose. Eventually a group of people start to speculate with money that is not theirs. Bankrupt crypto exchange FTX may be this cycle's poster child. After a year of the bear market, and savage losses for speculators in crypto currencies the full scale of losses at FTX has been revealed. There are similarities with Enron back in the 2001, following the dot com bubble. Enron created an electronic commodities trading platform (Enron Online). Eventually Enron sunk billions of dollars into building a telecom network with no return and hid the losses via market to market accounting where assumed future profits were booked as actual current profits. Using this historical analogy FTX is a signpost along this journey of a bear market, one which indicates that we’re at the halfway mark.
Valuations have corrected, and those businesses which can deliver earnings offer returns regardless of the economic environment. However many companies still need to assess how the recession will impact their business and force change. Rising unemployment then becomes a signal that we are towards the end of the bear market and that corporate earnings are finding a sustainable trough.
Quote of the week
Biden pardons two Turkeys called “Chocolate” and “Chip”, his favourite ice cream flavour.
Timothy Nerozzi, Fox News
It’s that time of the year again when New York lights up with an array of colours, balloons and music making its way across the glistening skyscrapers to celebrate the American holiday of Thanksgiving. The Macy’s Thanksgiving Day Parade is a three-hour spectacle which travels around Manhattan and ends outside the US department store’s Herald Square flagship. The route runs 2.5 miles, from 77th Street and Central Park West, south to 34th Street-Herald Square.
Following several years of scaled-back events due to Covid restrictions, the parade was set to be a showstopper. It included floats, giant balloons of cartoon characters — including Stuart the Minion, marching bands and costumed revellers all geared up to put on a breath-taking display.
President Biden and first lady Jill Biden called into NBC's coverage of the Macy's Thanksgiving Day Parade Thursday, but the conversation got off to a rocky start. NBC's Dylan Dreyer greeted the president at the beginning of the segment, but the two parties struggled to connect for around 20 seconds. "Can you hear me, Mr. President?" Dreyer asked.
"We're here," Biden responded. "Oh, I was so worried this call wasn't going to go through," said Dreyer.
As is tradition, Biden pardoned two turkeys from North Carolina on Monday, "Chocolate" and "Chip," which he said is his favorite ice cream flavor.
Source: The Evening Standard, The New York Post and Fox News