Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.
Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.
–THE FINANCIAL IRONMONGER BLOG NO 33/2018–
Those of us left at the helm, during what is meant to be the becalmed month of August, have long learnt that events can soon prove otherwise. Much as sailing is 90% tranquillity, and 10% blind panic. Movements get exaggerated by a lack of trading volume, and, occasionally, a total idiot doing the steering. We have reached the half-way mark this week, and the watch keepers are looking closely at China and Emerging markets, both down 20% year to date, not least because of the strong dollar.
Then there is Turkey. Since the failed coup two years last July, Turkish authorities have seized 879 companies worth $11.32 bn in assets, shut down 147 media companies, and imprisoned anyone deemed nasty, including an American pastor, to which the Donald has taken objection. It reminds me a little of the start of the First World War; no one could remember why they were fighting, but since we are here etc.
Those who failed to understand the new American foreign policy must get it now, which is America First. A hail of sanctions destroyed the Turkish currency, sent interest rates skywards, followed by more sanctions, for good measure. And some for Russia, too, just to keep them sharp. Economically, Turkey is of no significance, being smaller than Florida, but it is a member of NATO, and a buffer to the chaos in Syria. That actions have consequences is clearly for the birds.
Curiously, given that Pastor Andrew Brunson has been incarcerated for two years, this has not grabbed the attention of the media previously, but “in every church in the country, people know his name” according to Johnnie Moore, a member of an evangelical advisor board that counsels Mr. Trump. The Financial Times explains that one quarter of the US population are evangelicals, and Trump got more than 80% of their vote at the election.
With the mid-terms coming up in November, there is everything to play for. Amanda Sloat of the Brookings Institution states “The Brunson case is a rallying cry for evangelicals within the Republican base because you have a Christian pastor being held in a Muslim majority country”. Central casting could not have put it better, cue the movie, but who would have thought that someone ministering to a tiny flock of Turkish Protestants could bring about a currency crisis which has caused the lira to fall by a third against the dollar, year to date.
You would think that the economy would be centre stage as the vote looms, and it will be a feature, but essentially he is going with the same playbook which won him victory last time. Creating jobs, imposing tariffs on countries that don’t play fair, and draining the swamp in Washington. He knows that the tariffs are self-defeating, and there will be adjustments, but he will claim, only on his terms.
The swamp has only got larger; special interest groups have become seriously un-nerved by his unpredictability, and thus the number of lobbyists is at a record high. Unintended consequences.
The economy, which is the thing that matters most to voters of all persuasion, and none, is booming. Reducing regulation and cutting corporate tax rates is bringing home some of the growth, and jobs, that had previously gone in the other direction, to emerging markets.
It is easy to foresee 3%+ growth in real GDP for the next few years, a continuation of the increase in new jobs, and a greater spread of prosperity across the country. And if America’s gain comes at a cost to others, that will go in the playbook, as well. What little opposition he faces is based on hating everything he has done and achieved, a line that did not work in 2016, and has even less credibility now that he has a track record. I suspect that they will tack left, which has never worked before, but that is for another day.
Those of you who have seen the pictures of the collapsed motorway bridge in Genoa, Italy, must wonder how this could possibly happen, to which the answer is poor design, construction, maintenance, and a deaf ear to numerous well- founded warnings. Much like the Grenfell disaster in the UK. My fear is that the Italian banking system has been operating in a similar manner.
–MORE ABOUT OUR GUEST BLOGGER, DAVID OAKES–
David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.
After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.
The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.