The Cambridge Weekly – 11th October 2021

Economy hits an air pocket

October has carried on where September left off, with quite a bit of daily up and down for markets, but with a slight downwards trend. We deliver our end-of-month review of September in this week’s second article. For UK readers, the lack of positive vibe in stock markets is probably unsurprising, with petrol last week only slowly returning to being a commodity – rather than a scarcity – but with many staple goods still not as readily available as consumers expect them to be.

September market review: Autumn chill for the economy

September brought the summer joy in markets to an abrupt end. Investors were nervous about China’s largest property developer Evergrande defaulting on its debt triggering a Chinese financial crisis (Which it did not). Added to this were worse-than-expected macroeconomic data and rising inflation leading to fears of higher interest rates. US and UK government bond yields increased as central bankers reasserted their commitment to reducing emergency monetary support measures but also pricing in rising inflation, as supply bottlenecks appearing longer lasting than had been anticipated.

Trust in UK plc appears to be in short supply

Panic at petrol pumps and pig populations culled – it has been another painful week for Britons. Supply shortages have been a feature of the world’s post-pandemic recovery, but rarely have such issues been as acutely felt as in the UK right now. There are a few explanations for this. Brexit effects have teamed up with pandemic shocks to squeeze the UK labour market particularly hard – mainly in areas with previously high proportions of migrant workers. Problems have been compounded by what seems to be a peculiarly British present-day penchant for panic-buying. Economists have speculated that this bandwagon effect might itself be a consequence of people’s perception of the crisis, and confidence in the government’s ability to manage it (or rather lack thereof). In any case, this perfect storm leaves the nation with more acute supply crunches than elsewhere, and sharp demand spikes to match them.

Italy may have the leader to achieve its growth ambitions

Since the global financial crisis, there have been numerous political efforts to revive the sleeping beauty Italy. The (once) strong industrial base in the North and wider economy needs oxygen, but has long been held back by an enormous administrative apparatus, regulation, fractured banking system, and (some maysay) many years of austerity. After almost decades of hopes rising and fading, an international heavyweight took on the task: Mr “Whatever it takes” himself, former European Central Bank (ECB) President Mario Draghi.

Read the full commentary here

This material has been written on behalf of Cambridge Investments Ltd and is for information purposes only and must not be considered as financial advice. We always recommend you seek financial advice before making any financial decision.


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Source of financial market data: MorningstarDirect.