Hello,

 

Last week and indeed the bank holiday weekend was another display of the unpredictability of markets. There have been several eye-catching headlines in recent days as markets experienced what can best be described as ‘a series of unfortunate events’. Whilst much has been written on the last few days’ developments, below is our attempt at a concise summary of events.

 

On Friday, the unexpected surge in US unemployment (more below), to an almost three-year high, triggered recession fears. Preceding this, in what has been described as a “spectacularly poorly timed decision” the Bank of Japan chose to hike interest rates for just the second time in 17 years, causing the Japanese yen to strengthen considerably against the dollar. This resulted in the unwinding of the popular ‘carry trade’. On Monday, Tokyo’s Topix fell 12.2%, the sharpest fall since “Black Monday” in 1987. Both events formed an unfortunate coincidence for markets. Over the weekend, the effect was compounded by news that Warren Buffet (largely viewed as one of the greatest investors of all time), had sold down over half of his stake in Apple, a significant component of the ‘Magnificent Seven’ leading stocks. Buffet disclosed that Berkshire Hathaway’s cash pile sits at its highest level since 2005, at $276.9 billion. The disclosure, as imagined, prompted negative sentiment for prospects in markets.  

 

Although stocks have suffered in the last number of days, sentiment appears to have improved markedly overnight. Many commentators have noted that no singular catastrophe has occurred, and the economy is not currently facing a significant emergency.

 

As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.