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Will COP26 Affect my Savings?

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Will COP26 Affect my Savings?

Wednesday, November 10th, 2021

There cannot be anyone reading this article who hasn’t heard of COP26, the conference on climate change and global warming which is taking place in Glasgow in the first two weeks of November. (If you didn’t know, COP stands for Conference of the Parties – those countries which signed the original UN Convention on Climate Change in 1994). 

All our clients will have their own views on climate change and the Conference. Some will agree with Boris Johnson’s assertion that it is “one minute to midnight” for the planet: others may be slightly more sceptical, wondering why attendance at a conference on climate change needs 400 private jets – between five and 14 times more polluting than commercial airliners – flying in and out of Glasgow. 

This is not the place to discuss the merits of those arguments – but perhaps it is the place to ask another question. What effect – if any – will COP26 have on my savings and investments? 

Three days into the Conference, it was widely reported that most big UK companies and financial institutions will soon be required to show how they will hit climate change targets. “The rule book will be re-written for net zero,” said Chancellor Rishi Sunak, referring to the UK’s stated aim of reaching ‘net zero’ (a balance between the carbon a country or business is emitting and the carbon it is removing from the atmosphere) by 2050. 

By 2023, companies will need to set out detailed plans for how they will move to ‘a low carbon future’. “The aim is to increase transparency and accountability,” said the Government, adding that it was not “making firm-level net zero commitments mandatory”.

…Not yet, anyway. You suspect that in the future that may very well be a piece of legislation that finds its way onto the statute books. Add in the increasing pressure on companies to comply with ESG (environmental, social and governance) requirements and you suspect that in the future, a company’s results may be reviewed for a great deal more than the bottom line. 

‘Impact Investing’ – investments made with the intention of generating positive environmental and societal change alongside a financial return – is growing rapidly, especially among younger investors. Whatever their feelings about the environment, companies may well find themselves with little choice other than to meet the demands of legislative change and/or pressure from potential investors. 

The simple answer to the question we posed is that COP26 – or even COP27, which will be in Egypt’s Sharm El Sheikh – may have little immediate effect on your savings and investments. But the mood of legislators and campaigners is clear: companies will need to change what they do and how they report results to investors. 

That will be a challenge for the companies – as well as fund managers and investment managers. They’ll need to consider a lot more than profitability, market share and future growth prospects. But as all our clients know, we work with some of the very best fund managers there are, and we’re in regular contact with them, making sure that your savings and investments stay on track to meet your long term financial planning goals. 

November Market Commentary

Wednesday, November 3rd, 2021


October was the month which brought us Chancellor Rishi Sunak’s second Budget of the year. Normally that would make the headlines, but October was also a month when the world gave us plenty to worry about. 

With factors such as rising energy prices and supply chain issues impacting economies worldwide, the UK’s economic outlook may well be heavily dependent on events beyond the Chancellor’s control.

Rishi Sunak had described his Budget as one for a “new age of optimism”: one that would deliver “a stronger economy for the British people”. But in China, the price of coal was rocketing, factory gate prices reached their highest level for 26 years and the country missed all its key economic targets for the third quarter. 

Growth for the July to September period slumped to 2% in the US, and the German government sharply cut its growth forecast for the year, citing “supply bottlenecks and high energy prices”.

There was also plenty of political unrest in the month. Tension between China and Taiwan was described as ‘the worst in 40 years,’ with Chinese leader Xi Jinping issuing a thinly-veiled ‘keep off’ message as he described plans for re-unification as an “entirely internal” matter. 

China fired a hypersonic missile round the world in a move which appears to have taken the US completely by surprise. North Korea sent a ballistic missile into the sea off Japan in a move which surprised no-one at all. And US President Joe Biden told new Japanese Prime Minister Fumio Kishida that the US would defend the disputed Senkaku Islands in the event of an attack by China. The islands – which are uninhabited – are currently controlled by Japan but claimed by both China and Taiwan. 

The month did end with some semblance of global harmony, as world leaders at the G20 summit in Rome endorsed a deal on a global minimum corporation tax rate of 15%, which will be enforced from 2023. 

So another month when there was plenty of news to digest. As always, let’s look at all the details…


As noted above, Rishi Sunak delivered his second Budget speech of the year on Wednesday October 27th. It was, in some ways, a strange speech. As you will know by now, he committed himself to an extra £150bn of spending, with the inevitable higher taxation to pay for it. Then he suddenly changed tack at the end of the speech, talking about a ‘moral challenge’ facing the country, his own dislike of higher taxes and making a pledge to reduce taxation in the future. 

He sat down with Conservative backbenchers enthusiastically waving their order papers, but the Budget split opinion on all sides of the political spectrum. The left described it as a ‘bankers’ benefit’, while the right criticised what it saw as excessive spending and taxation. The Institute of Fiscal Studies made it very clear that the tax burden would continue to increase, stating that there was “clear blue water between now and any time in the past”. Looking further ahead, they saw little increase in household disposable income, which would be “almost stagnant” over the next five years, growing by just 0.8% each year. 

Many business groups also criticised the Budget, with Tony Danker of the CBI saying that the Budget “did not go far enough to deliver the high investment, high productivity economy the Government wants”.

The month opened with the news that business confidence had ‘fallen off a cliff’ in September, as supply chain problems, rising energy costs and the shortage of fuel all combined to drive up prices.

However, there was some good news around in October. Figures for August showed that the economy had grown by 0.4% in the month as more people ate out, went on holiday and – wellingtons at the ready – attended music festivals. 

Government borrowing fell in September: at £21.8bn it was the second-highest September figure on record, but was £7bn less than in September 2020. Inflation in September dipped slightly to 3.1% from the 3.2% recorded in August, although the relief may only be temporary. 

Huw Pill, the Bank of England’s new chief economist, warned that inflation is likely to hit, or surpass, 5% early next year – and said that the Bank had a “live decision” to make on interest rates at its rate-setting meeting on November 4th. The food and drink industry added weight to the argument, with Federation boss Ian Wright telling MPs that inflation is between 14% and 18% for hospitality firms – and that it will inevitably lead to price rises for consumers. 

What of jobs? There were plenty of stories of companies taking on new staff in the month, with Addison Lee, London’s leading private hire firm, looking to take on 1,000 new drivers, which hopefully says something about the economic recovery in the capital. More generally, the Recruitment and Employment Confederation reported in the middle of the month that there were now 2.29m job vacancies, with more than 600,000 being added since the last week of August. The growth has been spread across the country, said the REC, making competition for staff ever more fierce. 

The month ended with two pieces of good news on the jobs front, both centred on the north-east. Envision, the Chinese firm behind Sunderland’s ‘gigafactory’ announced a huge expansion – with the factory’s capacity increasing sixfold – as it looks to bolster its electric battery division. Not to be outdone, Saudi chemicals giant Sabic announced that it was to invest nearly £1bn at its Teesside plant in a move that will create and protect 1,000 jobs. 

The FTSE-100 index of leading shares had a good month, rising 2% to end October at 7,238. The pound was up by a similar amount against the dollar, closing the month trading at $1.3689. 


We mentioned the twin threats of power shortages and inflation in the introduction, and they were certainly in evidence in Europe. 

October started with the news that inflation in the Eurozone had soared to a 13-year high, with figures from September showing inflation had risen to 3.4% from 2% in the previous month, the highest figure since September 2008. 

There was perhaps even worse news to end the month, as the German government cut its growth forecast for the year from 3.5% to 2.6%. Economy Minister Peter Altmaier cited energy costs and problems in the supply chain – especially for semiconductors – as the reason. “In view of the current supply bottlenecks and high energy prices worldwide, the hoped-for final spurt will not happen this year,” he said, before adding that in 2022 “the economy will gain momentum significantly”.

In between these gloomy bookends, there was more bad news for the car industry, which is now threatened by a shortage of magnesium. Europe imports 95% of its magnesium (which is used to strengthen aluminium) from China and, according to Bloomberg, could run out by the end of November, threatening millions of jobs in sectors from the car industry to aerospace and defence. 

There was some consolation for the beleaguered car industry when Volvo (now owned by China’s Zhejiang Geely Holding Group) saw its shares jump from £4.50 to £5.10 on its £13bn debut on the Stockholm stock exchange. The company had hoped to raise £1.7bn from the listing as it gears up to become fully electric by 2030. 

On the political stage, disagreements between the EU and Poland over whose law takes precedence continued. Social Democrat Olaf Scholz remains the favourite to succeed Angela Merkel as German Chancellor, and a new name was whispered for next year’s French Presidential election. Right-wing commentator and essayist Éric Zemmour has not yet officially entered the race, but a recent poll put him ahead of Marine Le Pen as the likely challenger to President Macron. 

Europe’s politicians – and economists – would have ended the month mulling over the latest growth figures for the Eurozone. Figures for the third quarter showed growth of 2.2% in the 19 countries that make up the Eurozone. This was ahead of expectations but inevitably gave rise to worries about further inflation, which was expected to hit 4% for October. 

The region’s major stock markets were, however, in an optimistic mood. Germany’s DAX index shrugged off any worries with a 3% rise to 15,689 while the French stock market did even better, gaining 5% in the month to close at 6,830. 


As we reported last month, September was a poor month for US stock markets, with the Dow Jones index falling 4% and the S&P 500 down 5%, in what was the markets’ worst month since March 2020. 

October saw them regain the lost ground – and more – in a month which brought us the third quarter figures from the major tech companies. While they reported some very large numbers, however, third quarter growth for the wider US economy was down to just 2% (from 6.7% in the previous quarter) in the face of supply chain problems, rising inflation and further Covid restrictions in some states. 

The month started with the news that the US had added a disappointing 194,000 jobs in September, although the unemployment rate fell from 5.2% in August to 4.8%. There are currently 7.7m people out of work – a significantly higher number than before the pandemic. 

Electric car maker Tesla was much in the news. It revealed record quarterly sales and profits for the third quarter: revenues rose to $13.76bn (£10.05bn) as it sold more than 240,000 cars, with profits rising to $1.6bn (£1.18bn). A deal to sell 100,000 to Hertz saw the share price leap and made Tesla the fifth company to reach a $1tn (£730bn) valuation. 

Google, of course, has already reached that landmark and announced a third straight quarter of record profits. Revenues for the July to September period were ahead of Wall Street expectations at $65.5bn (£47.8bn) with the company reporting a net profit of $18.9bn (£13.8bn). 

Facebook posted profits of $9bn (£6.6bn) for the period, although the row over leaked documents and unethical behaviour from the company rumbled on. Facebook also announced that henceforth its holding company would be known as Meta – reflecting Mark Zuckerberg’s commitment to developing the Metaverse, the virtual reality future he seems intent on steering us all towards. 

The name ‘Meta’ apparently comes from the Greek word for ‘beyond.’ It’s also the Hebrew word for ‘dead.’ Let’s hope it is the former Mr Zuckerberg is steering us towards…

The only one of the tech giants to disappoint the market was Apple, whose shares fell 5% after its third quarter earnings – despite being a record and 29% up on last year – were around a billion dollars short of expectations. Unsurprisingly, boss Tim Cook blamed supply chain issues and the continuing shortage of semiconductor chips. 

The fall in Apple’s share price was good news for fans of Microsoft, which duly reclaimed the title of ‘world’s most valuable company.’ 

…And Wall Street was much more Microsoft, Tesla and Google than Apple, as US stock markets more than made up the ground lost in September. The Dow Jones index climbed 6% to close October at 35,820, while the more broadly-based S&P 500 index was up 7% to 4,605. 

Far East 

Let’s start off where we ended last month – with the problems at Chinese property giant Evergrande. As you may remember, the company has hundreds of billions of dollars of debt and reportedly owes money to 171 domestic banks and 121 other financial firms. September ended with the company missing a £35m interest payment to foreign bondholders – the second missed payment in a week – and throughout the month, the company’s share price lurched up and down, depending on whether a payment had been made or missed. 

By the end of the month, the company chairman was apparently putting his own house up as collateral and – as we reported in October – bankers UBS estimate there are ten property developers in China with combined debt nearly three times the size of Evergrande. 

To property add panic. We have reported elsewhere in this Bulletin on rising prices for both raw materials and energy. Nowhere was that more keenly felt than in China. 

By the middle of the month, the price of coal had reached a record high, increasing by 10% in one day as flooding hit one of the country’s key mining areas. The impressively-named National Development and Reform Commission said that in view of the shortages the price of electricity generated by coal would be allowed to rise and fall by 20% (compared to a previous upside limit of 10% and a lower limit of 15%). 

Quite what that does for planning and cash flow in Chinese industry is anybody’s guess, and it was no surprise to see another surge in factory-gate prices. In September, they grew at their fastest rate for 26 years, adding to worries about both local and global inflation. 

Unsurprisingly, Goldman Sachs – which a month ago said that China would have zero growth in the third quarter – cut its growth forecast for the year from an already low 5.8% to just 5.4%. 

Goldman Sachs was wrong – but not by much. Official figures confirmed that the economy grew by 0.2% in the third quarter compared to the previous three months. Year-on-year, it was up by 4.9% compared to the third quarter in 2020, against a generally expected figure of 5%. Perhaps more worryingly, industrial output in the third quarter was up by just 3.1% against a forecast of 3.8%. 

There were no such worries for HSBC, which smashed expectations for profits in the third quarter, boosted by the release of reserves that had been set aside to cope with expected pandemic-related defaults. Analysts had forecast profits to come in at $3.78bn (£2.76bn): HSBC sailed past that, posting pre-tax profits for the three months of $5.4bn (£3.94bn). 

The region’s stock markets, however, largely took their cue from worries about inflation and energy prices, with the exception of Hong Kong’s Hang Seng index, which rose 3% to 25,377. China’s Shanghai Composite index fell 1% to 3,547, while the Japanese stock market was down 2% at 28,893. South Korea was the worst performer, with the market there down 3% in the month to 2,971. 

Emerging Markets 

We have mentioned power shortages already and they will almost certainly be mentioned again in the coming months. The Emerging Markets section of the Bulletin is no exception – but let us start with a story that sounds like something a James Bond villain would envy. 

El Salvador, as regular readers know, became the first country in the world to accept Bitcoin as legal tender. The country’s President took to Twitter in October to announce that the country had begun ‘mining’ Bitcoin using power harnessed from a volcano. President Nayeb Bukele said: “We are still testing and installing, but this is officially the first Bitcoin mining from a volcano.” He confirmed that the project had started by generating 0.00599179 of a Bitcoin, worth approximately £208. So there may be some way to go…

Rather more seriously, India is on the brink of an unprecedented power crisis, with more than half the country’s 135 coal-fired plants ‘running on fumes’ as coal stocks run critically low. 70% of India’s electricity is generated using coal, with the shortage threatening to derail the country’s economic recovery from the pandemic. 

Like many countries, demand for power has picked up sharply in India as the country has come out of the pandemic, with consumption in the last two months up 17% on the same period in 2019. India is the world’s second largest importer of coal, so will be badly hit by global price increases. 

For now this wasn’t reflected on the Indian stock market, which had a relatively quiet month, closing October unchanged in percentage terms at 59,307. The Russian market gained 1% to end at 4,150 but it was a poor month in Brazil, where the stock market fell 7% to finish at 103,501. 

And finally…

The ‘And finally…’ section of the Bulletin has brought you many heroes over the years and this month we must induct another into our Hall of Fame. Step forward Danish artist Jens Haaning, who was given $84,000 (£61,000) by the Kunsten Museum of Modern Art in Aalborg to create a work of art for a forthcoming exhibition. 

After receiving the money, Haaning e-mailed the exhibition’s curator saying that he had changed his mind. He duly delivered a blank canvas to the Museum, which he had titled ‘Take the Money and Run.’ He then kept the money. Many of our readers might see it as a suitable comment on modern art…

Doing rather less well in the monetary stakes was California man Mauro Restrepo. Mr Restrepo’s marriage was in trouble, apparently due to a curse placed on it by a witch hired by his ex-girlfriend. Seeking a solution, Mr Restrepo Googled ‘psychics’ and contacted Sophia Adams, a ‘psychic love coach’. Suitably convinced, Mr Restrepo handed over $5,100 (£3,700) to save his marriage. You won’t be surprised to hear that the matter is now with the lawyers…

Finally this month, we make the short trip to Ireland, where new rules to combat the spread of Covid have come into force. These now mandate the wearing of masks in nightclubs, but not when you are drinking or dancing. We can’t help but wonder exactly what else people are meant to be doing in a nightclub, if it’s not drinking or dancing!

Perhaps Mr Restrepo should have taken his wife to one. It would certainly have been cheaper than finding a psychic love coach on Google…

How long until we’re paying with Britcoin?

Wednesday, October 13th, 2021

In the first week of September, El Salvador, a Central American country with a population of just under 7m and ranked 101st in the world according to GDP, created history. It became the first country to accept the cryptocurrency Bitcoin as legal tender. 

Millions of people downloaded the government’s new digital wallet which gave away $30 (£22) in Bitcoin to every citizen. Businesses became obliged to accept Bitcoin as payment. 

It now looks likely that Ukraine will follow suit, with President Volodymyr Zelensky aiming to create a ‘dual-currency’ country by the start of 2023. Zelensky is a vocal Bitcoin supporter, and intends to initially introduce Bitcoin alongside the current currency, the hryvnia, with the intention that it will eventually become the dominant means of exchange. “The people of the Ukraine are prepared for it and they expect it,” he said. 

Ukraine ranks 56th in the world by GDP: with the greatest respect, neither it nor El Salvador are major economic powers. But it now seems inevitable that other, larger economies will follow their lead and introduce a digital currency. This might be Bitcoin – but it seems increasingly likely that a digital version of their current currency will be used. 

China has already tested its digital yuan currency. Earlier this year 181,000 consumers in Suzhou City (near Shanghai) were given the yuan equivalent of £6 to spend at participating outlets in a local shopping festival. Like other consumers who have taken part in Chinese trials, all they had to do was download the Bank of China app. 

…At which point those of you with privacy concerns might start to be worried. “Does this mean the Government could track whatever I spend?” Yes – and for Governments that is one of the huge advantages of a digital currency. Imagine if digital transactions became the norm – all fully trackable and traceable. As cash is used less and less often, and is perhaps even actively discouraged, the unknown economy withers and dies. Rishi Sunak can only dream of what that might be worth to him in tax receipts.

So are we on the way to ‘Britcoin?’ Will we see a digital pound? The Chancellor has already asked the Bank of England to look at the case for a central bank-backed digital currency, allowing businesses and consumers to hold accounts directly with the bank (meaning an account would not be with say, Barclays or HSBC, but with the Bank of England). 

Such a move seems inevitable in the long run. Back in El Salvador they are “excited and worried” in equal measure by the move to Bitcoin, with many people wondering just how stable savings and/or earnings would be in such a notoriously volatile currency. 

Presumably central bank-backed digital currencies like ‘Britcoin’ and the digital yuan would alleviate such worries, but you do wonder how long it would take for another, ‘unofficial’ currency to become established. There will always be people who would rather their transactions weren’t tracked by the authorities.

Is China heading for a Junk Bond Crisis?

Wednesday, October 13th, 2021

It has been 14 years now, but many of our clients will remember the collapse of Lehman Brothers. 

The collapse of Lehmans, a global financial empire founded in 1847, happened in September 2008 and was the climax of the subprime mortgage crisis. Lehman Brothers was notified of a pending downgrade in its credit rating, due to its heavy exposure to subprime mortgages. The US Federal Reserve failed in its efforts to re-negotiate financing for Lehman, which subsequently filed the largest bankruptcy in US history, involving more than $600bn, at the time approximately £333bn. 

Lehman Brothers’ bankruptcy triggered a 4.5% one-day drop in the US Dow Jones index, similar falls around the world and a general financial panic. Fourteen years on, the question is now being asked, could the same thing be about to happen in China? 

Originally called the Hengda Group, the Chinese company Evergrande was founded in the southern city of Guangzhou in 1996, during a period of mass urbanisation in China. In 2009 it raised approximately £400m in an initial public offering on the Hong Kong stock exchange. 

Its principal business is selling apartments, mostly to middle and upper income buyers, and in 2018 it was ranked the most valuable real estate company in the world. It also has interests in any number of other companies from tourism to health to a large investment in electric cars and the Guangzhou Evergrande football team. 

However, Evergrande has hundreds of billions of dollars in debt, and there are increasing concerns over whether the company will be able to service the debt. As long ago as 2012 Andrew Left, a well-known short-seller in the US, was highlighting concerns about the company. In 2016 Left was suspended by the Hong Kong stock exchange, due to his publication of a highly critical report on Evergrande, a company he has labelled “insolvent.” 

More recently many stock markets fell on September 20th of this year, over fears that Evergrande would not be able to meet debt payments that had become due. Earlier in the month the Shanghai Stock Exchange temporarily suspended trading in the company’s bonds (specifically, its 6.98% July 2022 Corporate Bond) over what it called “abnormal fluctuations” following a ratings downgrade. 

Evergrande has been dubbed “China’s Lehman” and supposedly has more than $300bn (£219bn) of debt. If the company were unable to service this debt and subsequently collapsed then the fallout could spread throughout the Chinese property sector and, indeed, the wider Chinese economy. 

Would the Chinese authorities allow such a big company to fail? The answer is, “quite possibly” as there are clear signs Beijing wants to rein in excessive corporate borrowing. According to a report in the Guardian, Evergrande owes money to 171 domestic banks and 121 other financial firms. Bankers UBS also estimate that there are ten property developers in China with combined debt nearly three times the size of Evergrande. In other words, if Evergrande defaults other companies could quickly follow, which would be bad news for China and the wider global economy.

What is ESG?

Wednesday, October 6th, 2021

There have been a thousand-and-one articles written since the pandemic on people’s changing attitude to work. Millennials and the generations that follow them – so we are told – want different things from work. Flexibility, the option of working from home and, above all, to work for a company that shares their values: that values purpose as much as profit. 

It is not surprising then that we are hearing more and more from companies about ESG – their environmental, social and governance credentials. What really is ESG? And can it possibly matter as much as profits? After all, without profit you cannot pay your employees: you cannot re-invest in the business and you cannot pay dividends to your shareholders. 

You could argue that companies’ concerns with ESG are not new. The origins could be traced back to the 1800s when religious groups such the Quakers and Methodists ran their businesses according to socially responsible principles, and established socially responsible investment guidelines for their followers. 

More recently – in 2006 – the United Nations launched a set of six investment principles which perhaps started the incorporation of ESG into mainstream investment practice. Simply put ESG criteria judge how a company meets its environmental obligations, how it manages relationships with employees, suppliers, customers and the local community and the principles, composition and behaviour of the leadership team. 

By the same token ESG investing looks to invest in companies that espouse those values. This, in some ways, brings us back to the generations mentioned above. Millennials and their successors not only want to work for companies that share their values, they want to invest in them as well. Often they want to go one step further, and make investments that have a positive and measurable social and economic impact. 

“Impact investing,” as it has been dubbed, is now the fastest growing area of responsible investment. The World Economic Forum estimated that $1tn (£730bn) of assets were committed to impact investing in 2020, with the sector forecast to grow at $250bn (£183bn) annually. 

It is small wonder then, that companies are paying more and more attention to meeting their ESG obligations. Of course the bottom line remains important – although many of us remember Uber famously being valued in the billions despite saying that it may never make a profit – but now both investors and employees are using other criteria to judge companies. You will hear a great deal more about ESG and impact investing in the months and years to come.

October Market Commentary

Wednesday, October 6th, 2021

You will no doubt be aware that September was a month when shortages dominated the headlines. As we will see below, it was by no means a problem confined to the UK: sadly it does not look like a problem that will quickly disappear. We have, for example, written previously about the shortage of semiconductor chips which has hit car production around the world. In September the boss of Daimler suggested that this could last through 2022 and “into 2023.” 

September was also a month when global diplomacy, and its possible implications for trade, reared its head. Chinese jets flew into Taiwan’s air defence zone and North Korea launched a test cruise missile into the Sea of Japan. Most significantly, the US, UK and Australia signed the AUKUS deal, allowing Australia to receive nuclear powered submarines. 

Predictably China criticised the deal as a “threat to stability” in South East Asia, and France was said to be outraged after losing the contract to build the submarines. Any Australia/EU trade deal will now not happen until next year at the earliest.  Despite talks between Boris Johnson and Joe Biden, a UK/US trade deal also looks unlikely at the moment, with the US President saying, “We’re going to have to work that through…” 

September saw the oil price rise above $80 for the first time in three years and, perhaps unsurprisingly, it wasn’t a good month for world stock markets, with the majority of those we cover in the Bulletin falling in the month. 

As Joe Biden might say, let’s “work through” all the details…


When he was Chancellor of the Exchequer, George Osborne seemed to preface every Budget speech by reminding us that the UK was only a small part of the world economy. Whatever action he took, events elsewhere could easily render it irrelevant. September, and perhaps the months running up to Christmas, may well be a period when Osborne’s Law holds true. Supply-chain problems have caused shortages, whether that is on the supermarket shelves or at the petrol stations. As City AM reported, the shortages also “clamped down on UK manufacturing growth.”

Where you put the blame for the shortages may well depend on your political point of view but, as we report below, supply-chain issues are not a problem confined to the UK, and the power shortages in China may make the position worse, and push up prices, around the world. 

Away from the headlines about shortages there was the usual mixture of good and bad news. In the middle of the month it was reported that the UK economy grew at the fastest rate of any of the G20 countries in the second quarter, with growth of 4.8% between April and June. By the end of the month this figure had been revised upwards to 5.5%. The ratings agency Fitch has predicted that the UK economy will grow at 6.6% this year which is well ahead of the forecast from the Office for Budget Responsibility. 

The UK has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and September brought the formal start of the talks. The CPTPP is a $9tn (£6.7tn), 11 country trading bloc. Donald Trump famously withdrew the US from the agreement but, as we report below, China has now applied to join it. 

Much of the work on the UK’s application to join the CPTPP was done by Liz Truss when she was International Trade Secretary. In September’s re-shuffle she became Foreign Secretary, with Anne-Marie Trevelyan taking over her previous role. 

The Government was in the news for much more than a reshuffle in September, as it broke two manifesto commitments, increasing national insurance to pay for social care and temporarily suspending the triple lock on pensions. 

The end of September brought the end of the furlough scheme, the Coronavirus Job Retention Scheme to use its full title, which will unquestionably see some workers lose their jobs. The BBC reported that approximately 1m workers were still on the scheme as it ended. 

That said, job vacancies went past the 1m mark in September, and there are plenty of stories of companies, including Amazon, offering inducements as they look to recruit temporary staff for the Christmas period. 

Let us end the UK section where we began it, with the Chancellor of the Exchequer. Rishi Sunak will present his second Budget of the year on October 27th. What was a difficult task in March looks even tougher eight months on, as he tries to keep the recovery going and start to pay the Coronavirus bill. He will also need to keep a lid on inflation, which reached 3.2% in August as food prices rose, and has been forecast to reach 4% by the end of the year. 

For now the Bank of England is saying it does not expect any interest rate rises, to counter inflation, this year. Any rate rises would, of course, push up the cost of servicing the Government’s debt. Borrowing in August was higher than expected at £20.5bn, down on the same month last year but still the second-highest August figure on record. 

The FT-SE100 index of leading shares had a relatively quiet month. Having started September at 7,120 it ended the month down just 34 points at 7,086. The pound was down by 2% against the dollar, closing at $1.3458. 


September got off to a positive start in Europe, with Ryanair predicting a rapid rebound in air travel and revealing that it had beaten its forecast numbers for August. 

Wizz Air announced similar figures, with passenger numbers up more than 50% in August to around 3.5m. However, passenger numbers were down 44% for the twelve months to August, illustrating the long shadow the pandemic still casts over the travel industry. 

The main story in Europe, though, was the German General Election, held on September 26th. Having stepped down as leader of the Christian Democrats (CDU) in March 2018 Angela Merkel had made it known that she would not be seeking a fifth term as Chancellor, leaving new leader Armin Laschet as the party’s candidate. 

Opinion polls throughout the campaign did not make good reading for the CDU. The Social Democrats (SPD) topped the poll with 25.7% of the vote and a provisional 206 seats in the Reichstag, with the CDU on 24.1% and 196 seats. With 368 seats needed to form a government there could, in theory, be a CDU/SPD coalition. However, at the time of writing both Laschet and SPD leader Olaf Scholz are claiming that they will be able to form a government and a three way coalition made up of one of the main parties, the Greens (who came third with 14.8% of the vote) and the pro-business Free Democrats (who came fourth) looks much more likely. 

Like other major economies around the world Germany is suffering supply-chain problems and shortages in the wake of the pandemic. What it emphatically does not need is a prolonged period of paralysis while a new Government is formed. 

Germany is also facing worries about inflation and demand for gold coins and gold bars in the country has reached its highest level since 2009. According to the World Gold Council demand for coins and bars in Germany was up by 35% in the first half of the year, compared to a rise of 20% for the rest of the world. 

While Germany was preparing to go to the polls Europe as a whole was reacting to the AUKUS submarine deal, with France predictably outraged. It now looks as though any trade deal between the EU and Australia won’t happen until after the next French elections, due to be held in April next year. 

The EU also unveiled a new strategy for boosting economic, political and defence ties in the Indo-Pacific region in the immediate aftermath of the AUKUS deal. The aim of the strategy is to “strengthen and expand economic relations, help partners fight and adapt to climate change and boost co-operation on healthcare.” Make of those grand ambitions what you will!

There was definitely no grand ambition on Europe’s major stock markets in September. The German DAX index was down 4% to close at 15,261: the French stock market fell back 2% to end the month at 6,520. 


The US, like every major economy, has had its share of good and bad news as it recovers from the pandemic. But is the bad news starting to outweigh the good? 

The month began with disappointing news on employment, with the US economy adding just 235,000 jobs in August, well down on the 1.05m created in July. The unemployment rate did fall, from 5.4% to 5.2% but the jobs figures, combined with a decline in consumer confidence, prompted several banks to cut their forecasts for US GDP growth in the third quarter. Morgan Stanley did not so much cut their forecast as slash it, reducing it to 2.9% from a previous 6.5%. Goldman Sachs cut its forecast from 5.5% to 3.5%. 

The other worry, which it shares with every major economy at the moment, is inflation. Prices rose again in August to take consumer price inflation on a year-on-year basis up to 5.3%. 

There was, though, some good news. The US manufacturing sector strengthened, largely driven by an increase in new orders. The Purchasing Managers’ Index rose from 59.5 in July to 59.9 in August. The housing sector remained strong, with one index measuring US house prices showing a 19.1% annual increase in June 2021. 

The US Federal Reserve was certainly in the glass half full camp, saying in a statement that the US economy was continuing to strengthen, that the jobs market was improving and that “currently high levels of inflation remain transitory.” In the accompanying press conference Jerome Powell, Chairman of the Fed, gave a clear indication that the central bank would start to reduce its economic stimulus measures later this year. 

None of the above, of course, mattered to the good ship Amazon, which continued to sail merrily along. September brought the news that it would need to recruit another 55,000 people, to add to the 1.3m it already employs worldwide. That’s roughly equivalent to the population of Estonia. 

This was in stark contrast to the “old economy,” with GM announcing that it would halt production at most of its US plants in September, as the shortage of semiconductor chips continued to hit carmakers. Ford and Toyota also reduced production during the month. 

The Federal Reserve may have had its glass half full in September, but for Wall Street it was very much half-empty. The Dow Jones index fell 4% to end the month at 33,844 while the more broadly-based S&P 500 index fared slightly worse, dropping 5% to 4,308. 

Far East 

There has been so much news in the Far Eastern section of the Bulletin this month, especially with regard to China, that it is difficult to know where to start. 

Perhaps the most appropriate place is at the end of the month, when Goldman Sachs became the latest bank to cut its growth forecast for China, as the country continues to struggle with energy shortages. Having previously forecast that the Chinese economy would grow by 8.2% this year, the bank is now forecasting growth of 7.8% following estimates that up to 44% of China’s industrial activity has been adversely affected. 

Perhaps even more significantly, the bank is forecasting zero growth for the third quarter, citing a ‘perfect storm’ of increased regulation, tight global energy supply, surging coal prices and a crackdown on carbon. China’s “factory gate inflation” is the highest it has been for 13 years, due to a shortage of raw materials. 

The other major story was Evergrande, the Chinese property company which was ranked the most valuable real estate company in the world in 2018. It now has hundreds of billions of dollars of debt and, according to one source, owes money to 171 domestic banks and 121 other financial firms. 

There are real worries as to whether Evergrande will be able to meet its debt repayments. Will the company be bailed out by the Chinese government? Is it “too big to fail?” We may not have to wait long to find out, by the end of the month Evergrande was selling assets to meet debt repayments and reportedly missing a payment of £35m to foreign bondholders due on the 29th. Angry investors in the company have apparently moved on from simply protesting outside the company’s headquarters to taking senior management hostage. One executive in the south eastern province of Jiangxi was blockaded in his office by 300 protesting investors. They were described by one publication as having gone “full pitchfork.” 

More worryingly, perhaps, bankers UBS estimate that there are ten property developers in China with combined debt nearly three times the size of Evergrande. 

In previous Bulletins this year the words “Chinese authorities” and “crackdown” have frequently appeared in the same sentence. September was no exception as the country’s National Radio and Television Administration trained its sights on “vulgar influencers” as they pursued Xi Jinping’s stated goal of common prosperity. The general clampdown on online games, and the time spent playing them, also continued. 

At the end of the month China’s central bank made the move it seemed to have been edging towards for some time, when it announced that all transactions of crypto-currencies, such as Bitcoin, would be illegal. Such transactions, it said, “seriously endanger the safety of the people’s assets.”

We have commented above on the UK’s continuing application to join the CPTPP. The day after the UK, the US and Australia announced the AUKUS pact China duly applied to join the CPTPP, a move which many analysts saw as a bid to leave the US increasingly isolated on the world stage.  

September proved to be a very mixed month for the region’s stock markets. The Japanese Nikkei Dow index was up 5% to end the month at 29,453. China’s Shanghai Composite index managed a gain of just 1% to 3,568 while the South Korean market went in the opposite direction, falling 4% to 3,069. Hong Kong’s Hang Seng index seemed to bear the brunt of the worries about Evergrande and the possible slowdown in China, falling 5% in the month to close at 24,576. 

Emerging Markets 

September was an unusually busy month for news in the Emerging Markets section of the Bulletin. El Salvador, not a country we have previously covered, became the first country in the world to accept the cryptocurrency Bitcoin as legal tender. 

As we reported above, China has now made cryptocurrency transactions illegal as it trials a digital yuan. However it may well be that smaller currencies opt to go down the Bitcoin route, with Ukraine expected to make it legal tender by 2023. 

Despite a second wave of the pandemic the Indian economy rebounded sharply, with figures for the three months to June showing growth of 20.1%, compared to a drop of 24% in the same period last year. 

Elections were held in Russia, with United Russia, the party that supports Vladimir Putin, winning 315 out of 450 seats in the Duma. No surprise there, but what was striking was the very low turnout in the election, with many constituencies having turnout well below 40%. 

The month ended with the BBC reporting that Afghanistan’s banking system was close to collapse, with international aid to the country having dried up since the Taliban took power. 

On the stock markets, September was a good month for both the Russian and Indian markets. Russia’s stock exchange rose 5% to close at 4,104 while the market in India was up 3% to 59,126. The Brazilian stock market went sharply in the opposite direction, ending the month down 7% at 110,979. 

And finally…

You may well remember the Ever Given, the giant container ship which blocked the Suez Canal for six days earlier this year and was subsequently blamed for all manner of shortages including garden gnomes. 

Now comes news of a fully autonomous ship, based in Japan, which is about to face its first real test as it sets out on a 236 mile journey. Ultimately, Japan hopes that half of its ships will be piloting themselves. Clients may remember the fully autonomous security guard robot which drowned itself in a fountain. The hotel which replaced those irritating, unreliable staff with robot waiters, and had to hastily backtrack. Fully autonomous ships roaming the world’s oceans, what could possibly go wrong? 

September was unquestionably robot month. Amazon launched Astro, the home robot. Or, as it has already been dubbed, “Alexa with wheels. Staying on the subject, there is good news for any reader whose football team may not have made the best start to the current season. Founded by a group of robotics scientists, the Robot Soccer World Cup AKA the RoboCup, has set itself an ambitious target. The aim is that by the middle of the century a team of robot footballers will beat the most recent winners of the real World Cup. 

The robots use artificial intelligence to make decisions such as whether to pass or shoot. There you are, the term “midfield dynamo” could take on a whole new meaning…

Lockdown last year brought us any number of tales of people doing what can only politely be described as unusual activities. An Italian gentleman ran a full marathon round his dining room table, a chap in Cardiff was stopped by the police as he wandered round a local beauty spot in medieval armour and carrying a toy sword. Now comes news from Indonesia, where Agus Widanarko is apparently bringing joy to those isolating in Central Java province by dressing as “Super-isoman”. Donning a Spider-Man costume, with an extra mask for safety, Agus has been providing entertainment to children who have been in self-isolation. Truly an effort to marvel at. 

September Market Commentary

Wednesday, September 8th, 2021

The defining image of August 2021 had little to do with the stock market on the surface, it was, of course, the withdrawal of British and American troops from Afghanistan. As some readers will know, Afghanistan has significant mineral reserves, which some estimates put at $1tn (£730bn). These reserves include lithium, so it will be no surprise if at some stage we see the China/Pakistan economic corridor extended into Afghanistan. 

August was, by and large, a good month for the majority of stock markets we report on. Most markets gained ground, with the Indian stock market having a spectacular month. 

It was a less positive month for the blockchain site Poly Network, where hackers exploited a “vulnerability in its systems” and stole some $600m (£436m) in digital currency tokens. Following an appeal on Twitter the hackers duly returned some of the money in what was one of the largest reported thefts of digital currency. 

There were signs from various purchasing managers’ indices around the world that the pace of recovery from the pandemic may be slowing down. These worries were not helped when China closed Ningbo-Zhoushan, the world’s third-busiest cargo port, due to an outbreak of Covid. 

August ended with images of the last American troops leaving Afghanistan and with Hurricane Ida hitting New Orleans, leaving one million people in Louisiana without power. 


August was a month when the news for the UK economy was mixed. Like many countries around the world the UK is recovering well from the pandemic, but there are worries that staff shortages may hamper the recovery, and that the Bank of England may need to tread a delicate path between stimulating the economy and keeping a lid on inflationary pressures. 

Figures for the second quarter showed that UK GDP had grown by 4.8% between April and June, with the expected strong performance from the services sector. The rise in output leaves the economy 4.4% below where it was in the last quarter of 2019, before the onset of the pandemic. 

International Trade Secretary Liz Truss said that she expects to complete negotiations for the UK to join the Trans-Pacific Partnership by the end of next year, as business confidence jumped to a new four year high. According to the survey by Lloyds Bank employers in the North West are feeling particularly optimistic. 

What does worry employers, however, is the shortage of staff. The Purchasing Managers’ Index for August hit a six month low of 55.3: while that still indicates optimism, it was significantly down on the 59.2 recorded in July. 

Equally worrying was a YouGov poll, which suggested that as many as 354,000 small businesses may not be able to repay the Covid loans they have received from the Government, due to cash flow problems and hold-ups in their supply chain. 

Any reader wanting their glass to be resolutely half-empty should, sadly, look no further than the UK car industry. We have written elsewhere about the impact the global shortage of microchips is having and, with staff still affected by the pingdemic, figures for July showed that just 53,438 cars were built in the UK, down 38% on July last year and the worst performance since 1956. Unsurprisingly, sales of second hand cars soared due to the shortage of new models. 

What about jobs and the high street? In the US, Amazon is, apparently, about to go into the department store business. Here in the UK a story on the BBC stated that the UK has lost 83% of its “main department stores” in the five years since the collapse of the BHS chain. To confirm what may well be the changing face of our town centres in the future, trials of shared banking hubs in two towns where all the bank branches have closed, Cambuslang in South Lanarkshire and Rochford in Essex, are to be extended to April 2023. 

If you would like other evidence of our changing shopping, and eating habits, then Greggs are to open 100 new stores, creating 500 new jobs, and Just Eat says it will create 1,500 new jobs in the North East. 

Despite the boost provided by the Euros, though, the high street continues to struggle, with City AM reporting that footfall in July was 34% down on the same month in 2019, with shoppers seemingly still unwilling to return to town centres. 

Online spending hit £10bn in July, the highest monthly spend in 2021 so far, bringing this year’s online total to £64.9bn – a massive increase of 56% on 2019. 

The UK’s FTSE-100 index of leading shares had a relatively quiet month. It rose just 1% to close the month at 7,120. The pound was down by 1% against the dollar, and ended August trading at $1.3755. 


August is, of course, the month when Europe traditionally goes on holiday, so news in this section of the Bulletin was in slightly short supply. 

Tesla boss Elon Musk announced that he hopes to start making cars at the Gigafactory just outside Berlin in October, “or soon afterwards.” The planned start date has been pushed back after battles with local environmental campaigners and what Musk described as “German bureaucratic delays.” 

Like many central banks the ECB has taken the first steps towards establishing a digital currency, beginning a two year investigation phase that could see a digital Euro by the middle of the decade. The ECB is worried that failing to implement a digital currency will undermine the Eurozone’s monetary autonomy, as foreign technology giants – and other digital currencies – gain ground. 

We report below on measures taken by the South Korean central bank to curb rising prices, and the ECB could soon have similar problems. Rising prices, a spike in Covid infection numbers and a drop in vaccinations dented German consumer confidence as Europe’s biggest economy headed into September. 

Despite this, August was a good month for the German stock market, which rose 2% to close at 15,835. The French stock market was up by just 1% to end the month at 6,680. 


August was another month in the US that got off to a good start thanks to the jobs figures. With the US economy growing by 6.5% in the second quarter, figures for July showed that 943,000 jobs had been created, against a general consensus of 870,000. Job vacancies now stand at a record 10.1m as lay-offs fell to their lowest level in 21 years. 

We have written previously about President Biden’s eye-watering $3.5tn (£2.55tn) budget proposals. In August they were approved by the US Congress and it now looks almost certain that the measures – which include significant packages for health, family support and climate schemes – will go ahead. The President also said that he wants 50% of all car sales to be electric by 2030. 

What won’t be going ahead, at least not until 2022, is a return to the office for staff at Apple. The company, which gave CEO Tim Cook a $750m payday, has said that it will delay calling staff back to the office until January at the earliest, citing fears of a further Covid surge. 

In other company news Amazon, having done so much to impact the traditional high street, is apparently considering opening department stores, with Ohio and California already earmarked as possible sites. 

The month ended with the Federal Reserve hinting that it may start to withdraw post-Covid stimulus measures later this year as the US economy continues to recover. However there are currently no plans to increase interest rates, despite a recent spike in inflation. 

In common with most of the markets we cover, August was a good month in the US. The Dow Jones index rose 1% to close the month at 35,361 while the more broadly based S&P 500 index was up 3% to 4,523. 

Far East 

We have devoted a lot of column inches in previous market commentaries to the pro-democracy movement in Hong Kong, and the subsequent crackdowns by the Chinese authorities. Perhaps unsurprisingly, official figures released in August showed that Hong Kong’s population had shrunk by 87,100 in the year to June. 89,200 Hong Kong residents left the city, although this was partially offset by inflows from mainland China. 

The Beijing authorities continued their crackdown on the tech companies in August. Tencent was the latest company to come under fire, with prosecutors filing legal action over claims its messaging app did not comply with laws protecting minors. With the authorities branding online games “electronic drugs” we can expect this tighter control of the tech sector to continue for some time. 

There was good news in Japan with the economy rebounding more quickly than had been expected, ahead of the Tokyo Olympics. The country’s GDP grew by 1.3% in the second quarter of the year, roughly twice the rate that had been forecast. 

There was less good news for Toyota, which announced plans to slash car production in September from 900,000 vehicles to 540,000 due to the global microchip shortage. At the end of the month the South Korean central bank became the first in the region to raise interest rates (from 0.5% to 0.75%) in a move aimed at curbing household debt and house prices, both of which have risen sharply in recent months. 

On the region’s stock markets China’s Shanghai Composite index had a good month, rising 4% to close August at 3,544. The Japanese stock market was up 3% to 28,090 but the markets in Hong Kong and South Korea were unchanged in percentage terms, finishing at 25,879 and 3,199 respectively. 

Emerging Markets 

There was some interesting company news in the Emerging Markets section. Square, the digital payments platform owned by the co-founder of Twitter, agreed to pay £21bn for the Australian ‘buy now, pay later’ firm Afterpay. The company has more than 16m customers and is used by 100m businesses around the world, and was seen as a key indicator for the no-credit-checks online payments industry that boomed in the pandemic. 

In a rather more conventional industry, Saudi Arabia’s oil giant Aramco saw its profits jump almost four times as the world recovered from the pandemic and demand for oil picked up. The world’s biggest oil producer said net income had risen to $25.5bn (£18.4bn) for the second quarter of the year. 

On the stock markets August was an excellent month for India’s BSE Sensex index, which shot up 9% in the month to close at 57,552. The Russian market was up 4% to 3,919 but it was a disappointing month for the Brazilian stock market, which fell 2% to 118,781. 

And finally…

August was not a vintage month for the ‘And finally’ section of this commentary. The month used to be known as the “silly season:” parliament wasn’t sitting, everyone in Europe was on holiday and journalists scrambled furiously to find stories to fill their column inches. As we covered in the introduction, August 2021 was very far from the “silly season” – but was there anything to lighten the gloom? 

Well, in this continuing summer of shortages McDonald’s ran out of milkshakes thanks to the shortage of lorry drivers. 

Appropriately for August insurer Zurich warned against the increased risk of outdoor fires – up 16% since 2019. Not in the woods though, but in your garage. It is, apparently, the fault of lockdown, as we’ve now all rushed out and bought outdoor pizza ovens, converted our garages into gyms (or bars) and made the old garden shed into a “shoffice.” Perhaps we could point our fingers at former Prime Minister David Cameron, who famously spent £25,000 on what he described as a “shepherd’s hut,” which included a wood-burning stove, sofa bed and sheep’s wool insulation. 

There’ll certainly be no problem for 12-year-old Benyamin Ahmed, from London, if he wants to put a shed/office at the bottom of the garden. He has made approximately £290,000 in his summer holidays, after creating a series of pixelated artworks called Weird Whales and selling non-fungible tokens (NFTs), which allow artwork to be ‘tokenised,’ creating a digital certificate of ownership that can be bought and sold. 

If you have no idea what that last sentence meant then you are not alone: it’s clearly indicative of how quickly the world is changing. But let’s spare a thought for Benyamin’s teacher: any day now they will be struggling to understand an essay, entitled “What I did in my summer holidays…” 


Is Facebook really worth a Trillion Dollars?

Wednesday, August 18th, 2021

You may have seen the film The Social Network. In the film, Jesse Eisenberg, playing Facebook founder Mark Zuckerberg, is musing on wealth. “A million dollars?” he says, and shrugs. “But a billion dollars… that would be cool.” 

The film was released in 2010. Eleven years on the scriptwriters may need to add three more zeros. 

At the end of June the company won a legal battle against US regulators, the shares rose 4.2% taking Facebook’s valuation past the $1tn mark, making it the last of the big five tech firms, along with Amazon, Google, Netflix and Apple, to reach that milestone. 

A trillion dollars is £729bn, but is Facebook really worth that much? It is an interesting question for many investors, with traditional ways of valuing companies increasingly seen as irrelevant. 

Go back a few years and investors were concerned about a company’s price/earnings (PE) ratio. A company’s share price relative to its earnings-per-share. A high PE ratio usually indicated a company that was growing quickly: but one that was too high, especially when compared to other, similar companies, often made investors wary. 

Then there was the dividend yield, a simple ratio showing how much a company paid each year in dividends, relative to its share price. Investors looking for income went for solid companies with a good dividend yield. Investors looking for growth would accept a lower dividend yield, especially if the company was reinvesting profits, rather than paying them out in dividends to shareholders. 

Underlying both these traditional measures was, of course, the belief that a company’s job was to make a profit. 

How times change. Uber went public in 2019. At the time the company freely admitted that, while it had 91m users, “it may never make a profit.”

Such a statement would have been incomprehensible to a traditional investor. If a company never makes a profit, how can it pay a dividend? If it never makes a profit, how can it even continue in business? 

Facebook, of course, does make a profit. In the first quarter of this year it reported revenue of $26bn (£19bn) which was up 48% on the previous year. The company’s net receipts grew 94% to $9.5bn (£6.9bn) as the average price of its ads increased by 30% and the number of ads it delivered rose 12%. 

Many companies with spectacular valuations don’t make a profit, though. They are valued on expectations of future profits, on potential market share and on their perceived ability to disrupt traditional markets. 

All this, inevitably, makes the job of the fund manager much more difficult, as they need to look at potential future results rather than what’s happened historically and it is, inevitably, further complicated by the changes the pandemic has brought about. To think of a company in the future being valued at a quadrillion dollars may sound far fetched, but there was a time when the same could be said about a trillion.

August market commentary

Wednesday, August 4th, 2021


As everyone expected, July saw the G20 endorse the plan from the G7 meeting in Cornwall to set a minimum global rate of corporation tax. 

A headline in City AM proclaimed that US tech giants could face a $28bn (£20bn) tax bill, with suggestions that the tax could raise as much as $87bn (£63bn). We report below on the profits the tech giants made in the second quarter of the year. If the current trend continues they could soon be filing paltry amounts like £20bn under petty cash. 

July was, of course, the month in which the UK declared “Freedom Day,’” with most Covid restrictions being eased or lifted on July 19th. It is fair to say that the decision wasn’t universally welcomed, with scientists around the world condemning it and competing for the most alarming descriptions of what might happen. Many businesses, obviously, took a different view and rushed to re-open, assuming they could find the staff…

In foreign news Chinese leader Xi Jinping used a speech celebrating the 100th anniversary of the Chinese Communist Party to warn that China would not allow itself to be bullied by foreign powers, one can assume that refers to the US. In splendidly undiplomatic language, Xi warned that foreign powers “will get their heads bashed” if they try to influence the country. 

Sadly, it was the Chinese stock market that got bashed in July. Overall it was not a good month for world stock markets with continuing worries about Covid but, as we outline below, the Chinese and Hong Kong markets were particularly hit by the actions of the Chinese regulators. 


Inflation hasn’t been a word that has featured much in our market commentary of late but, with the UK economy recovering from the pandemic, there are fears of inflation starting to increase significantly. The Bank of England’s departing chief economist Andy Haldane has warned that inflation is “rising fast” and could reach nearly 4% this year. That is well above the Bank’s target rate of 2% (which was exceeded in May, when inflation reached 2.1%). 

Rising inflation would increase the cost of index-linked gilts and in turn increase the cost of servicing the debt the government has built up during the pandemic. Interest payments on Government debt jumped to £8.7bn in June. 

The figures for May showed that the UK economy grew more slowly than expected, only up by 0.8% in the month, leaving the economy still 3.1% below pre-pandemic levels according to the Office for National Statistics. 

Aside from that, though, there was plenty of good news to report in June. Nissan announced a £1bn investment and major expansion of electric vehicle production at its car plant in Sunderland. This will create 1,650 jobs plus thousands more in the local supply chain. On top of this, in what was an excellent month for the North East, planning approval was granted for Britishvolt’s gigafactory in Blyth, Northumberland. Eventually it should produce enough lithium-ion batteries for 300,000 electric cars. It is expected that this will create another 3,000 jobs, plus those in the supply chain. 

Business confidence was up to its highest level since 2005. Consumer confidence was also up as the economy rebounded and the housing market remained strong as buyers were, according to one report, “seeking more space.” A report in City AM revealed that UK fintech firms had raised $5.7bn (£4.1bn) in a record breaking year. 

Despite all this, the UK will clearly be paying for the pandemic for years to come. It also appears that the only way the bill will eventually be paid is with a vibrant and thriving economy. Encouragingly, there were yet more forecasts of increased growth for the UK. The EY Item Club predicted that the economy would grow by 7.6% this year (the fastest pace since 1941) and by 6.8% in 2021. The International Monetary Fund wasn’t quite so optimistic, forecasting growth of 7%, the joint-fastest of the G7 countries. 

Inevitably, though, the news was not all good, with thousands of firms reporting staff shortages as the “pingdemic” forced workers to stay at home and self-isolate. The meat industry reported that food supply was on the edge of failing.

The Euros fuelled a surge in spending in the hospitality sector, and UK retail duly posted its strongest quarter on record, with sales in the second quarter of the year up 28.4% on the previous quarter. The number of shoppers in high streets and retail parks rose to its highest level since the pandemic started. That said, it is still behind pre-pandemic levels and one in seven shops remains vacant. 

Even more worryingly, small shops are said to be struggling under a £1.7bn mountain of debt with high street businesses now owing four times the amount they owed a year ago. 

It is not just retail that has been badly hit by lockdown, data generated by Oxford Economics suggested that the pandemic and subsequent lockdowns has cost businesses in the creative sector an estimated £12bn in revenue and 110,000 jobs. 

It all added up to a month where the FTSE-100 index of leading shares barely moved. It ended July down just five points at 7,032. The pound rose by 1% against the dollar in the month and closed July at $1.3902. 


July was a relatively quiet month for European news, with the most significant development coming right at the end of the month. 

Figures showed that the Eurozone economy had grown by 2% in the three months to June, bringing the 19 nation bloc out of the double-dip recession it had suffered in the previous two quarters. 

Although the Eurozone is still below the pre-pandemic level of late 2019, the second quarter saw growth in all the individual national economies. Spain and Italy, two countries badly hit by the pandemic, saw growth approaching 3%, while Portugal reported that its economy had grown by 4.9% as tourism finally picked up again. 

The improved figures from Portugal could, perhaps, have been predicted at the beginning of the month, when Ryanair reported traffic numbers had climbed from 1.8m in May to 5.3m in June ,compared to just 0.4m in June 2020. 

With leaders at the G7 and G20 meetings having agreed plans for a global minimum level of corporation tax, the EU announced that it would suspend its plans to tax the tech giants. However, this did not stop Luxembourg’s data protection regulator imposing a hefty fine of €746m (£637m) on Amazon, claiming that its processing of personal data did not comply with EU law. Amazon said that it would contest the fine, but saw its shares drop by more than 6% on the news. 

In a month where growth was hard to find on world stock markets Europe’s two major markets fared better than most. The German index was unchanged in percentage terms, up just 13 points at 15,544 but the French market was up 2%, to close July at 6,613. 


If July was a quiet month for news in Europe, it was the exact opposite in the US. 

The month started with both good news and bad news. Good news in that the US economy added 850,000 jobs in June as the economy re-opened, with the news sending the stock market to a record high. Bad news in that 200 US companies were hit by what was described as a “colossal” ransomware attack. The finger was duly pointed at the Russia-linked REvil ransomware organisation. There was more of the same later in the month when the US accused China of being behind an attack on Microsoft’s exchange servers. 

We mentioned worries about inflation in the UK section above and the same is true in the US. Consumer prices jumped 5.4% in the 12 months to June as the cost of used cars and food increased. That was up from 5% the previous month and makes the biggest 12-month increase since August 2008. 

With consumer spending, fuelled in part by the government’s fiscal stimulus, surging in June to take it above pre-pandemic levels, inflation is unlikely to fall in the near future. 

In the middle of the month President Biden signed an executive order cracking down on Big Tech, saying that “capitalism without competition is exploitation” and calling for tougher scrutiny of the tech giants. 

…And at the end of the month Big Tech noted what the President had said and reported bumper profits in the three months to June 30th as the lockdown boom continued. To give just two examples, Apple’s profits nearly doubled to $21.7bn (£15.6bn) in the three month period: Microsoft’s profits for the same period were $16.5bn (£11.8bn), up 47% year-on-year as demand for games and cloud services increased. One analyst described the figures from the Big Tech companies as “absolutely stunning.” 

At the end of the month the Federal Reserve declared that the US economy was “making progress” as it opted to keep interests near to zero. Jobs growth and the economy had strengthened but, warned the Fed, “risks to the economic outlook remain.”

Wall Street, however, was siding with Big Tech rather than the Fed’s caution. The Dow Jones index rose 1% in the month to close at 34,935 while the more broadly based S&P 500 index was up 2% to 4,395. 

Far East 

Looking through my notes for the Far East section, this month can be summarised in one word: regulators. As we will see below, both the Chinese and Hong Kong markets suffered sharp falls in the month; sudden crackdowns by the regulatory authorities in Beijing had much to do with it. 

Last month we reported that China’s ride-hailing app, Didi, duly floated on the US stock market and ended its first day with a valuation of £68.5bn (£49.6bn), the biggest flotation by a Chinese company in the US since Alibaba.

July had barely started before China’s internet regulator ordered app stores to stop offering Didi’s app, saying that the firm had illegally collected users’ personal data. Didi warned that this would have “an adverse impact on revenues” and the share price fell by 20%. A lawsuit from US investors, claiming that the company had failed to disclose discussions with the regulators, swiftly followed. 

Shares in TenCent also fell later in the month as the regulators ordered the company to end exclusive licensing deals. The regulator was trying to tackle the company’s dominance of online music streaming in China. There were also suggestions that firms wanting to list on foreign stock markets will face greater scrutiny, especially if they have data on more than a million users. 

Unsurprisingly all the Chinese stocks in the US were down on these moves by the authorities. The Nasdaq Golden Dragon Index, which follows the 98 biggest US-listed Chinese stocks, is down 45% since reaching a record high in February of this year. 

More generally, it appeared that China’s post-pandemic boom could be losing steam. Gross Domestic Product (GDP) increased by 7.9% in the second quarter, compared to the same quarter in 2020. This was less than half the rate seen in the first quarter and below economists’ predictions of 8.1% growth. 

There were no such problems for Samsung, which said it expects quarterly profits to rise 53% as the global chip shortage continues. The company forecast operating profits of $11bn (£8bn) for the three months ending in June. 

But with the regulators’ crackdowns and with the US warning companies against doing business in both Xinjiang province and in Hong Kong, it all added up to a gloomy month for Far Eastern stock markets. Hong Kong’s Hang Seng index was down 10% at 25,908 while China’s Shanghai Composite index was down 5% at 3,397. The Japanese index was also down 5% to end the month at 27,284 while the South Korean index fell by 3% to 3,202. 

Emerging Markets 

Most readers of the Bulletin will be familiar with Deliveroo. July saw the stock market debut of the Indian equivalent, Zomato. 

Shares in the food-delivery app surged 66% when they floated on the Indian stock market, with investors showing a healthy appetite (sorry) for internet start-ups that had performed well during the pandemic. Inevitably the company is still making a loss, as some analysts churlishly pointed out, but as you will know if you’ve read previous market commentaries, that no longer seems to matter with stock market valuations. 

Sadly, the major emerging markets we cover in the Bulletin didn’t fare anywhere near as well as Zomato. The Brazilian market was down 4%, closing the month at 121,801 while the Russian market declined 2% to finish July at 3,772. The Indian stock market was unchanged in percentage terms, rising just 104 points to 52,587,  within touching distance of its all-time high of 53,290. 

And finally…

2021 has been a tale of shortages, ranging from garden furniture and garden gnomes to rather more essential items. July brought the news that the UK could now be rocked by a shortage of Haribos, with the German company saying it is short of lorry drivers to deliver the sweets to UK wholesalers. 

Less concerned with Haribos were the football fans expected to drink nine million pints of beer before England’s Euros semi-final with Denmark. With a similar amount presumably drunk before the final at least beer was coming home in July, even if football didn’t quite make it…

Many clients may recall their PE lessons at school with something akin to horror, not least the dreaded burpees. Our Hero of the Month for July was Brazilian mixed martial arts fighter Cassiano Laureano, who set a new world record for the most burpees performed in an hour. Mr Laureano – who lives in Singapore – casually knocked out 951 burpees – around 16 a minute. We expect he then declared himself too tired for double Physics.

We leave you this month with news of a product that is “bouncing back” in style. As lockdown eases and more of us eat out, we are apparently finally caring what we look like and sales of stain remover Vanish have rocketed. Presumably tomato sauce stains on your shirt were acceptable during lockdown, but not as the economy opens up. 

Or maybe I missed something. Along with garden furniture, garden gnomes and Haribos, could there be a shortage of napkins? 

Are we Right to be optimistic about the UK Economy?

Thursday, July 22nd, 2021

Is the glass half full or half empty? It’s one of the oldest questions (and clichés) there is. But right now you could be forgiven for thinking that as far as the UK economy goes the glass is not just half full, it’s completely full. 

The last few weeks have brought us a steady stream of good news. Post-Brexit the UK has agreed – or is very close to agreeing – trade deals with Norway, Iceland and Australia. According to recent reports International Trade Secretary Liz Truss is aiming to sign a free trade deal with New Zealand ‘by August.’ 

Manufacturing growth is at a 30 year high and even car sales – which were hit so hard by the pandemic – have recovered. The UK “optimism index” is at a six year high, and recent figures showed the average price of a house in the UK rising to record levels. 

Optimistic forecasts abound, with the CBI predicting that the UK economy will grow by 8.2% this year, up from a previous forecast of 6% and taking the economy back to pre-Covid levels. The economy will grow by a further 6.1% in 2022, the CBI forecasts, up from a previous figure of 5.2%. 

Still not convinced? The UK is now officially home to 100 “unicorns” – new tech firms with a valuation of more than $1bn (£721m). Tractable, an artificial intelligence start-up building computer vision tools became the latest, joining companies such as Skyscanner (from Scotland), Durham-based challenger bank Atom Bank and Darktrace, based in Cambridge, which uses AI to develop cyber-security solutions.

There are, of course, areas for concern. All is looking up, apart from the fact that ‘Freedom Day’ – originally scheduled for June 21st – has been pushed back. Apart from the fact that the UK could well face a third wave of the virus as the seemingly more infectious Delta variant holds sway. Apart from the fact that many UK businesses – especially in the hospitality sector – are struggling to re-open because of a shortage of staff.

The simple fact is that there is likely to be a mixture of good and bad news for the foreseeable future. This good and bad news will be reflected in stock markets, not just in the UK but around the world. So the only certainty is that regular contact with your financial advisers will be essential – and that your financial planning will need to be flexible and regularly reviewed. 

Yes, there is an increasing amount of good news but no economy – either in the UK or anywhere else – is out of the woods. We will continue to keep you up to date with developments and keep your financial plans under regular review.