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Sheldon Macdonald and Nathan Sweeney talk about the topics driving the markets in their weekly Monday update.
Monday Espresso Podcast - 18th November 2024
[00:00:00] Nathan Sweeney: Good morning, everybody, it is Monday, the 18th of November.
[00:00:03] Nathan Sweeney: Today, I'm joined by Sarah Tardino, assistant portfolio manager and lead analyst on UK equities, good morning, Sarah.
[00:00:10] Sarah Todino: Good morning, Nathan.
[00:00:11] Nathan Sweeney: So we dive straight in this morning, so Sarah, what was happening in markets last week?
[00:00:16] Sarah Todino: Generally a cautious element to the stock market this week, although Monday saw the S&P 500 and Nasdaq reach record highs.
[00:00:24] Sarah Todino: Markets were relatively muted for the rest of the week as traders were evaluating the impact of the US election.
[00:00:30] Sarah Todino: Gold fell to a two month low, that was pressured by the strong US dollar. The Brent crude oil price continues to be impacted by weakness in China, so Chinese consumption has been falling for six months now and that's expected to grow at 10% of the levels of last year.
[00:00:47] Nathan Sweeney: Okay, so some interesting data there. So let's start with those appointments you mentioned within the US so that did drag markets down.
[00:00:55] Nathan Sweeney: So, fundamentally, we have a number of different individuals being appointed to different positions within Donald Trump's cabinet.
[00:01:02] Nathan Sweeney: And we've had Robert F. Kennedy being appointed as the minister for health or the equal position within the US ultimately.
[00:01:10] Nathan Sweeney: And as a result of that, we've seen some hit to vaccine makers in the US because he is seen as a vaccine skeptic.
[00:01:20] Nathan Sweeney: So you'll all remember Moderna, so obviously one of those companies that did really well during COVID and the share price of that company is actually off about 50% year to date because of the Trump trade and the expectation of this nomination.
[00:01:33] Nathan Sweeney: It's off about 5% overnight following the appointment news that was made, so it really just shows you the impact that some of these appointments can have on markets short term.
[00:01:43] Nathan Sweeney: Now you can see that that's actually feeding into the UK market as well, last week, Friday morning, Glaxo opened up about. 4% down on that news, but it's just an example of how appointments can impact markets in the short term.
[00:01:56] Nathan Sweeney: The other thing you mentioned there was around the oil price as well so, I think one thing was, which was mentioned was Chinese data and clearly they're a big consumer of oil. So if you have weakness there, it's going to impact the oil price.
[00:02:07] Nathan Sweeney: So was there any other data points to note in the US last week?
[00:02:12] Sarah Todino: So in the US, inflation data was hotter than expected, we saw a rise of 2.6% in October, and that marks the first rise in inflation in seven months, but it was in line with expectations.
[00:02:24] Sarah Todino: This now puts the Fed in a difficult position on when to cut interest rates.
[00:02:29] Nathan Sweeney: Yeah, that's interesting because we did have Jerome Powell, who is the head of the Fed or the US central bank. He was at a conference last week and at that conference, he basically said that we're in no rush to cut interest rates.
[00:02:42] Nathan Sweeney: Why did he say that? You know, inflation is one reason because inflation is a little bit sticky. It's still low. It's come down a lot, but growth is also strong. So they don't need to cut rates at this point to stave off any recession because there is no recession.
[00:02:57] Nathan Sweeney: So Sarah, what about the UK? We've had some data out in the UK.
[00:03:00] Sarah Todino: Yes, there was a slowdown in UK GDP growth, with Q3 coming in at 0.1%, and forecasts there were for 0.2%. In recent months we've seen unemployment trending downwards, but the latest reading has seen unemployment rate edge up. 4.3% and that was above expectations of 4.1%.
[00:03:21] Sarah Todino: And alongside this we had wage growth excluding bonuses at 4.8% year on year and that's the lowest level in over two years, but again was in line with the bank of england's forecasts for wage growth.
[00:03:34] Sarah Todino: So, we had the budget a couple of weeks ago, which is likely to lead to higher inflation and economic growth further down the line, but from a company perspective, there's the increased minimum wage and increased employer national insurance contributions that will need to be factored in to future wage growth and employment going forward.
[00:03:53] Nathan Sweeney: Yeah, so it's quite interesting if we look at the growth figures that came out, they were lower than expected.
[00:03:59] Nathan Sweeney: But you have to remember that coming into that budget, companies were always going to hold back on spending because of the uncertainty that the budget brought. So you should see that in the figures and Rachel Reeves obviously had her mansion house speech last week and ultimately, she's on a path to looking to deregulate.
[00:04:18] Nathan Sweeney: So, post the financial crisis, we had a raft of regulation because there was too much risk in the financial system. A lot of people now believe that that regulation has gone way too far, so extreme, really.
[00:04:30] Nathan Sweeney: And what the government will be looking to do is to wind back some of that regulation, call it bringing it back to the middle.
[00:04:36] Nathan Sweeney: Because ultimately, if you're a company, you need to be able to take risks to drive growth. If you can't take risks, you can't drive profits. If there's no profits, you can't expect the economy to grow.
[00:04:46] Nathan Sweeney: So ultimately, that's what we're seeing from Reeves and that's what we're seeing from the government, so we expect to see good news on that side, which should be good for financials in the longer term as well.
[00:04:55] Nathan Sweeney: So Sarah, what have we got for the week ahead?
[00:04:58] Sarah Todino: So looking ahead, we've got inflation data for the UK, jobs data in the US, consumer confidence data in the UK and Europe.
[00:05:06] Sarah Todino: So it'll be interesting to see the UK consumer confidence figures as we did see a dip there ahead of the budget.
[00:05:13] Nathan Sweeney: Okay, thank you, Sarah, for joining us today and thank you everybody for listening.
[00:05:16] Nathan Sweeney: I hope you enjoyed the podcast and have a great week.