So here’s the thing, having had the chance over one of the coldest weekends in recent years to review the markets this weekend, and especially the UK market, it would seem that there is a good chance that the UK stock market is set for a decent performance over the next couple of months:
First let’s suppose that the UK concludes a deal (the Eurozone magnanimously decides that the £39 Billion divorce settlement is worth having) and the resultant concessions allow Mrs May to get a deal through Parliament. What happens? Business, Press and the Electorate heave a sigh of relief, feel better and hey presto a Spring stock market rally gets under way. Markets respond well and GBP strengthens.(For the time being…)
There is No Deal. What happens? Immediate turmoil (a major buying opportunity) Then, all hands to the pump at the UK Treasury and the Chancellor splashes the cash to inject the necessary stimulus into the UK economy as he will presumably be feeling pretty flush since that same £39 Billion will not be needed in the absence of a deal! Business, Press and the Electorate relieved at both a conclusion to all the uncertainty and buoyed by this largesse, feel better and hey presto a Spring stock market rally gets under way. Markets respond well and GBP strengthens.(For the time being…)
More another time about what happens afterwards in both these scenarios: inevitably initial euphoria will be replaced by angst, soul searching and regrets before…….another cycle.
Elsewhere much stronger US employment figures with a 304,000 increase on Friday in non-farm payroll looks a bit fishy and the market while wanting to believe, consider that number to be too good to be true and put it down to poor data collection on the back of the US Government shut down.
So as we enter the first full week of February, the US Stock market is within 4% of its high, the UK Stock market within 11% of its high, GBP is steady and unchanged against both the USD and EUR, and Bitcoin for those who follow it is at $3,477 versus its 12 month high of $11,767-now THAT is quite another story!
Last but not least and this should cheer everyone up, markets are willing to lend the US Government 10-year funds at 2.68% and the UK Government 10-year funds at 1.25%. Ok Ok I will own up but it has made you feel better, admit it… the German Government can borrow 10-year funds at 0.11%!
Discussion and Analysis by Humphrey Percy, Chairman and Founder