Financial markets have rallied since April, with investors growing more confident that economies will turn around quickly from the fallout caused by the pandemic. Their optimism has increased in recent weeks as various countries have started to ease lock-down restrictions and tentative signs of stabilisation have emerged. Daily activity trackers from the likes of Google and Apple show most developed countries edging towards normality, halving the declines suffered during their March and April lows. China is back to January levels, though the country’s unique policy circumstances (regarding lock-down and stimulus) mean it might not be a template for elsewhere.

Huge job losses will inevitably have an impact on consumption, which is at present being mitigated by massive fiscal stimulus. Indeed, fiscal deficits are off the charts: in the US, the deficit is expected to reach US $4 trillion this year (20% of GDP), without even taking into account the various spending programmes winding their way through Congress. 90% per cent of that increase is being financed by the US Federal Reserve, which has become the ATM of the US Treasury.

This should push the US “shadow” rate (which takes into account the impact of its unconventional easing) below the previous trough of -4.7% in real terms by the year end, down from the current -3.3% (yes, there is a negative sign at the beginning of those numbers!).


Read the full Q3 2020 Macro here.





Disclaimer: The value of investments and any income from them can go down as well as up and investors may not receive back their original investment amount. This communication is for information purposes only. It is not intended as a personal recommendation of particular financial instruments or strategies and it does not provide individually tailored investment advice. This document provides the views of the London & Capital Investment Team examining the fundamental background, economic outlook and possible effect on asset markets. This document is not an invitation to subscribe and is by way of information only. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision. If you are considering investing, you should consult your London & Capital adviser. The views expressed herein are those at the time of publication and are subject to change. Correct at time of going to press.
London and Capital Asset Management Limited is authorised and regulated by the financial conduct authority, 12 Endeavour square, London, E20 1JN. Firm reference number 143286. Registered in England and wales, company number 02112588. © London and Capital Asset Management Limited. All rights reserved. London and Capital Wealth Advisers Limited is authorised and regulated by the UK Financial Conduct Authority (firm reference number 120776) and by the U.S. Securities and Exchange Commission of 100 F street, NE Washington, DC 20549, with sec firm reference number 801-63787. Registered in England and Wales, company number 02080604. © London and Capital Wealth Advisers Limited. All rights reserved.