Tatton Weekly: 30 years; The UK’s inflation dynamics – ‘back to front’?; New chair for US Federal Reserve – will it matter?; Communist Party Congress in China: Investment implications?; 4 letter financial acronym with predictive qualities for currencies: CCBS

30 years

This week, the 30th anniversary of two formidable storms in October 1987 reminded us that extreme weather and capital market events are not something that only started after the year 2000. While most long-term return charts nowadays show the 1987 stock market crash only as a tiny blip, the application of a base-effect cancelling logarithmic scale (as in the chart above) illustrates just why this stock market crash was so unsettling. It may not have lasted anywhere nearly as long as the later crashes that burst the 2000 Dotcom bubble or the 2008 subprime credit bubble, but its severity taught the 1980’s privatisation investors that equity investment requires nerves in order to reap the longer term return reward.

The UK’s inflation dynamics – ‘back to front’?

UK workers may have become familiar with the recent pattern: Low unemployment, record number of people in work, business complaints about labour and skills shortages – but no wage rises.

New chair for US Federal Reserve – will it matter?

In February 2018, Janet Yellen’s tenure as Chair of the US Fed comes to an end, and it is understood that President Trump is already sifting CVs and hosting interviews for a replacement. President Trump has on occasion been critical of Mrs Yellen’s policies and stewardship, and, in return, Mrs Yellen has been steadfast in her approach.

Communist Party Congress in China: Investment implications?

Wednesday marked the beginning of the 19th Communist Party Congress in China, an event which will set the political agenda for the next five years. As we mentioned some weeks ago, the congress looks to be a consolidation of power for President Xi Jinping, who many experts now expect to lead the country not just for this upcoming five-year plan but beyond the next congress in 2022.

4 letter financial acronym with predictive qualities for currencies: CCBS

The little understood world of Cross Currency Basis Swaps (CCBS) is throwing up warning signals. The price levels on certain currencies have started to increase (or widen, as it’s often called).

 

Please click here for the full Tatton commentary.