In markets the hardest thing to get right (to the point of being impossible) is timing. So, I’m pleased to report that fortune has smiled on me this month: my recent two-week break coincided with possibly the dullest run for markets since records began – squeezing out two interesting weekly summaries would have been a tough ask. So, if you, like me, were taking a fortnight’s break from the 24-hour financial news cycle, you can relax – you missed nothing.
The last week has been a little wobblier though. You’d be forgiven for thinking this was due to the news coming out of Afghanistan, which has been bleak. But to the best of my knowledge that hasn’t been the cause. It has, instead, been the usual to and fro on the inflation-vs-deflation tug of war, which is all that markets can think about for now.
In this case, the very mild sell-off in equities, and corresponding rise in ‘safe-haven’ assets (such as government bonds or the US dollar) was caused by suggestions from US Federal Reserve officials that they may begin to taper their asset purchases by the end of this year. I could spend the rest of this note trying to explain exactly what “tapering asset purchases” is. But you wouldn’t thank me for it, not this close to the weekend.
So, I’ll turn instead to Asia where the market turmoil caused by the Chinese government’s recent actions continues to make for more interesting reading.
Asian markets fell by more than the global average again this week, extending the starker drops I described a couple of weeks back. In essence, the Chinese government has decided it doesn’t like the concentrations of power being built up by its tech companies. So it’s nipping them, painfully, in the bud. In fact, maybe ‘bud’ is the wrong term: Having performed spectacularly well for years, the Chinese internet companies’ were in full bloom. So now their woes are having a big impact on the Asian Stock Market Index – as companies like Tencent, which has dropped 40% in the last six months, had become huge parts of the market. This week it was the announcement of measures to ban unfair competitive practices that has wiped further billions off several Chinese tech behemoths.
Such concerns are frequently mentioned when thinking about US companies too, as antitrust talk has returned to the fore of late, and their tech giants are no longer the cuddly, universally popular entities they were when we first got smartphones (ahh, simpler times). But the US government has less inclination to clip its own companies’ wings and has less power than the Chinese Communist Party to do so even if it did. So, while the “FAANGS” aren’t winning with quite the gusto of the previous ten years, they’re holding up far better than their Chinese equivalents – for now.
That’s all that mattered for markets this week. Summer is a funny time though. Usually little happens, but when it does, things can move sharply. We’ll keep watching on your behalf.
Have a great weekend,
Simon Evan-Cook
(On Behalf of Raymond James Barbican)
With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.