Cambridge Weekly Update – 14th October 2019

Atmospheric improvements

It is quite incredible how much market sentiment can swing at the moment on the back of ‘atmospheric’ changes in the political debate. Only last week, we wrote how the political news-flow did not contribute positively to the short term outlook on either side of the Atlantic. Paired with continued indications of slowing global economic growth, stall speed concerns were making the round. This week, a far more optimistic narrative surfaced, leading to rebounding stock markets and a rapid rise in bond yields from their depressed, recession-foreboding lows.

China turning domestic

We have maintained for a while now that one of the most important investment stories to watch in the coming months will be the US-China trade war. Trade tensions between the world’s two largest economies have topped the list of concerns for global investors for nearly three years now, and have done further damage to the already slowing global economy. If we see a positive development on this front, it could boost investor and business sentiment enough to send both markets and the underlying economy upwards. If not, it is hard to see where the next growth spurt will come from.

Could Republicans oust their “great and unmatched” President?

Trump-watch has become a favoured pastime of economists and market commentators since his election to the White House nearly three years ago. That makes sense of course, given that his economic, foreign and trade policies – as well as his all-round behaviour – have been a key determinant of market sentiment and the underlying economy ever since.

Tax revolution to cope with the tech revolution?

One of the more interesting large-scale macro trends we had expected and have written about over the past 18 months is the political move against the large multinational technology companies. Up until a few years ago, it seemed that the likes of Facebook, Amazon and Google were allowed free rein in the uncharted territory of the technology frontier, as long as it led to price reduction for consumers and increased service levels. But the pressure on large technology stocks has been building for some time. In the wake of Facebook’s Cambridge Analytica affair and the competition stifling effects of Amazon and Google’s ever-expanding empires, there has been talk of new regulations to combat the dominance of the tech giants.

Read the full commentary here