Weekly View - Banned
For better or worse, the US dominated headlines last week. On Wednesday, the results of Georgia’s highly anticipated Senate run-offs were overshadowed by Trump supporters’ storming of the Capitol building, leading various social media platforms to ban Trump for inciting violence. On the same day, nearly 4,000 Americans died of covid 19. That’s a lot to take in, but after sifting through the news rubble, investors found optimism in the prospect of further fiscal stimulus in the US. Now that the Senate is no longer under Republican control as a result of Georgia’s run-off elections, president-elect Biden has a better chance of pushing through his agenda and delivering sorely-needed stimulus and support. This reinforces our positive stance on small caps, which should benefit from fiscal spending in our “revenge of the losers” investment theme for 2021.
The New York Stock Exchange threw confusion into markets through its flip-flopping on the delisting of three Chinese telecoms companies. President Trump issued an executive order late last year prohibiting Americans from investing in companies with ties to the Chinese military. We anticipate continued China-US tensions under the new administration. We will also be closely following the new US administration’s approach to Taiwan. Beyond China, we are positive on emerging markets as Asian economies continue to recover.
Elsewhere, glimmers of hope for the global economic recovery shone through some mixed macro news. While there was improvement in US non-manufacturing activity (ISM), Friday’s US employment report confirmed that the services sector is not yet out of the covid woods. However, the strength of Germany’s manufacturing orders are a clear indication of recovery in that sector. This bodes well not only for the euro area’s largest economy but also for the rotation to value and cyclical-sector stocks. The latter were further supported by a pick up in M&A activity, including Swiss cement maker LafargeHolcim’s acquisition of Japanese-owned Firestone Building Products, a US market leader in roofing, specifically green roofing. We are positive on event-driven hedge funds and infrastructure-related stocks, especially those specialising in green infrastructure.