Comments on Current Affairs

Around the world, various governments have embarked on quantitative easing (QE), coupled with support programmes to help alleviate the disastrous economic impact of the COVID-19 pandemic. However, QE manifests as support for financial markets, rather than for the ‘real economy’.  Notably, QE is a tool whereby the rich get richer – from rising stock prices – in the hopes that the wealth effect will see them spend money that will trickle down into the real economy. As it stands, the real economy is in dire trouble – and business profits are falling – whilst the global financial economy is in an upswing with a stock market recovery that is in full force.  Equity prices are moving upward.

Financial markets are fuelled by fear and greed. Essentially, greed drives prices up … and fear causes them to fall.   The investor’s emotional cycle:

The global outbreak of coronavirus or Covid-19, coupled with the sharp fall in oil prices, has created immense fear in the global financial markets. These are exogenous shocks which are difficult to anticipate.

This year’s Budget Speech was arguably one of the most anticipated (and closely watched) in recent history. So, what stood out – and what should savvy investors know about it? 

To begin with, Finance Minister Tito Mboweni surprised markets and promised to slash the sprawling public-sector wage bill.

Despite a volatile year, 2019 ended on a high note for global equities as a result of:

• Firm Phase 1 trade agreement between the US and China;
• A decisive Tory victory in the UK, which paved the way for a less uncertain Brexit; and
• A backdrop of easy monetary policy.