Contact us
Client and adviser portal
Log in

Testing Trump

Weekly update
  • Weekly market update
  • 5 minute read

A good week for

  • Sterling, which appreciated c. 1% versus peers.
  • Gold, which was boosted by the unwind of US dollar strength.

A bad week for

  • Oil, which fell -6% in US dollar terms.
  • The US dollar, which declined c. -1% over the week on a trade weighted basis.

US politics

Days after the first US presidential election debate, President Trump announced that he had tested positive for Covid-19 and was subsequently admitted to hospital. This event appears to have partially thawed relations between the Republican and Democratic parties, potentially increasing the chances that a new stimulus package will be passed ahead of the November election. Investors also appear to have interpreted Trump’s health emergency as a negative for his electoral campaign – in-person rallies are likely to be off the table for weeks, along with the second debate. With Biden ahead in the polls, any further boost increases the chances of a Democratic majority in the upper and lower house, making it easier for him to pass laws. This makes further fiscal spending more likely, as well as other proposed reforms, including higher personal taxes for the wealthy and tighter regulations for the healthcare sector, energy and banking.

Brexit

UK and EU negotiators completed the last formal round of talks ahead of the October European Council meeting without reaching agreement on the UK’s future relationship with the EU. Relations have been strained further by the EU commencing formal legal action against the UK in the event that it does not act to preserve the Northern Ireland protocol contained in the Withdrawal Agreement signed last year. However, Prime Minister Johnson and European Commission President agreed on Saturday to extend negotiations to early November, as “reasons for hope” remain. With the UK’s new relationship with the EU set to begin in January, with or without a deal, businesses are likely to face significant changes, as the deal discussed is narrow in scope.

UK economy

The UK household savings rate rocketed in the three months to June to over 29%, as harsh social restrictions curbed consumption activity. With measures relaxed over the summer months, we expect that consumption rebounded sharply, causing the savings rate to decline significantly. However, households may remain cautious on the economic outlook if unemployment rises, which typically corresponds with much higher saving. Should the increase in unemployment be sustained, the saving rate may then begin to fall again as an increasing number of households use savings to supplement income.

US economy

US unemployment continued to decline in September, but for less than positive reasons. While unemployment declined to 7.9%, from a peak of 15% in April, the decline was mostly driven by workers leaving the labour market. Labour force participation declined to 61.4% from 61.7%, with the biggest declines amongst older and prime-age female workers. Temporary unemployed workers (those on furlough) also fell as a share of total job seekers from 45% to 35%. Permanently unemployed workers are likely to take longer to find jobs than furloughed workers, pointing to a slower pace of employment growth.

Oil

Having rallied hard since April lows, the oil price has faced renewed pressure in recent weeks. While oil stocks have been depleted somewhat, the longer term outlook for oil demand is expected to be subdued into the second half of 2021 at the earliest. Demand in China has recovered significantly, but demand in the Americas and Europe remains somewhat weaker than usual. Despite this backdrop, the Organisation of Petroleum Exporting Countries (OPEC) and nations allied to the organisation are reportedly considering a production increase which would add 2 million barrels a day in 2021. With green infrastructure initiatives at the forefront of many governments’ stimulus plans, investors are also speculating as to whether peak oil demand will come sooner than expected.

> Download PDF including performance data

 

Important information
The information contained in this document is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites. CBAM6123

!

Before you invest, make sure you feel comfortable with the level of risk you take. Investments aim to grow your money, but they might lose it too.

Close Brothers Asset Management Logo

Important compliance information for institutional investors and FCA authorised intermediaries

For use by institutional investors, FCA authorised intermediaries and connected persons only – it must not to be relied upon by retail clients. If you are a retail client please return to the main part of the website.

Please read this page before proceeding, as it explains certain restrictions imposed by law on the distribution of this information and the countries in which our funds are authorised for sale. It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction.

This part of the Close Brothers website is for information purposes only. It is not intended to be relied upon to make any investment decision. Although the information herein has been obtained from sources believed to be reliable, neither Close Brothers Asset Management or any of its employees guarantee its accuracy, completeness or fairness. The most recent data has been used where possible. Except in so far as liability under any statute cannot be excluded, no member of Close Brothers Asset Management accepts liability (whether arising in contract, tort or negligence) for any error or omission in this document. 

The information contained on these pages is believed to be correct but cannot be guaranteed where data is sourced from third parties. Opinions constitute our judgment as at the date shown and are subject to change without notice. The information on this website is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. This does not constitute an offer or solicitation to sell shares in any of the funds referred to on this site, by anyone in any jurisdiction in which such offer, solicitation or distribution would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. 

Applications to invest in any fund referred to on this site, must only be made on the basis of the offer document relating to the specific investment (e.g. prospectus, simplified prospectus or other applicable terms and conditions). 

As a result of money laundering regulations, additional documentation for identification purposes may be required when you make any investment. Details are contained in the relevant Prospectus or other constitutional document. 

If you are unsure about the meaning of any information provided please consult your Close Brothers contact, financial or other professional adviser. 

The information contained on this site is subject to copyright with all rights reserved. It must not be reproduced, copied or redistributed in whole or in part. 

We may source data from reputable third party data providers, however, we accept no responsibility or liability for the accuracy of such data. 

We accept no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. 

You acknowledge and agree that it is your responsibility to keep secure and confidential any passwords that we issue to you and your authorised employees and not to let such password(s) become public knowledge. If any password(s) become known by someone other than you and your authorised employees, you must change those particular password(s) immediately using the function available for this purpose on the Website. 

On accessing the Close Brothers Asset Management website, you are aware of the following investment risks applicable to all Close Funds: 

PAST PERFORMANCE RISK-Past performance, though extensively used in analyzing investments, is not a reliable indicator of future returns. 

RISK OF PERMANENT CAPITAL LOSS-The risk that investments may fall in value permanently with little or no expectation of recovery, including the possibility of total loss of the amount invested. Typically, this applies to individual securities. 

RISK OF REDUCED INCOME-The risk that income derived from investments falls significantly and no longer fulfils its objective in a portfolio with a corresponding fall in the capital value if realised. 

VOLATILITY RISK-The risk of a decline in the value of a group of investments due to market fluctuations. Typically investors measure this risk over short timescales. 

INFLATION RISK-The risk that the growth of investments does not keep pace with inflation over the longer term, i.e. a reduction in the real purchasing power of one's capital. 

LIQUIDITY RISK-The risk that an investor cannot gain immediate access to capital. 

TAX RISK-The risk that the tax regime generally affecting returns, a particular asset or a specific tax efficient scheme may change or be removed with consequent impact on investment returns and strategies. 

CURRENCY RISK-The risk that movement in rates of foreign exchange may cause the value of investments and/or income derived from them to fluctuate independently of the value of the underlying asset and may amplify losses or impact gains when translated into the investor’s base currency. 

BENCHMARK RISK-The risk that investments do not beat a specific benchmark over the longer term, e.g. the failure to match the returns of a given equity index, bond index, or a blend of these. 

This site is operated by Close Asset Management Limited (Company No. 1644127) which is registered in England and Wales, is authorised and regulated by the Financial Conduct Authority and is a subsidiary of Close Brothers Group plc. Close Asset Management Limited is a member of the Close Asset Management group and uses the trading name Close Brothers Asset Management. Registered office at 10 Crown Place, London EC2A 4FT. VAT Registration No 245 5013 86.