"You don't waste October sunshine..."
Two topics this morning. The Outlook for Q4 and The Pandemic.
Let's start with Q4.
Starts today.. Get set, ready, go! As we enter the final quarter of this incredible year, stock markets are wobbly but remain close to record levels, bond markets have staged record issuance, and yields have never been so low. Yet London's City is empty, activity is crashing once more, millions face unemployment as second lockdowns bite across the land!
The good news is there will be no Christmas to distract us from the vitally important business of flustering and flaffing about markets. Bah Humbug rules will apply this year. There will be no New Year either – which means we shall be trapped in perpetuity in the misery that was 2020… Argg….
October is always a fascinating month. It's not just leaves falling off trees, but the occasional banker jumping out of high windows as the seasonal autumn market crash comes around. Can the gains seen since March be maintained? Or will it all come crashing down on a Manic Monday, Black Tuesday, Woeful Wednesday, Terror Thursday or any normal Friday?
I suspect markets remain flat for the time being. Probably. Maybe. Central banks have little choice but to continue juicing markets through zero rates and QE Infinity. When returns are so low, investors have little choice but to keep taking risk – meaning equity markets are likely to benefit. But it's getting increasingly selective out there. Even a broadly positive fundamental-led market doesn't mean bubbles aren't ripe for popping.
The shape of the global economy remains troubling – China would like us to think their domestic economy is resurgent, but oil and commodities remain weak, while job losses across Occidental economies are rising. Few folk are talking about synchronous recovery in 2021. Markets are rightly nervous.