The big news in the past week in financial markets is the accident report on the demise of Silicon Valley Bank—SIVB—which was put into receivership by US regulators on Friday. This was a very quick death spiral. At the beginning of the week, the stock was trading at a cool 280 bucks, and now my assumption is that the equity is zero. You’ll read many versions of this story this week, but I’ll try to sketch the stuff that everyone seems to to agree on. I will then highlight some of the areas where analysts and commentators disagree, and where there should be scope to make, or lose, money.
Read MoreLast week we learned that China’s population shrunk last year, for the first time in 60 years, by 850K, the net result of 9.6M live births, and 10.4M deaths. It is worth taking these numbers with a pinch of salt. Accurately accounting for some 1.4B people is difficult, especially down to a sub-1M difference between deaths and births. It’s possible that future revisions will show that China’s population has been shrinking since the beginning of the 2020s, or that it won’t start shrinking until 2025 or beyond. What is clear for anyone with even cursory knowledge of Chinese demographics, however, is that this headline was coming sooner rather than later. China’s fertility rate has long since declined below the replacement level, and all-age mortality is now rising as the population ages. But does it matter that China’s population is now shrinking?
Read MoreIn my day-job I am forced to write my economic outlook for the new year in December, alongside most other economists. This is part of a long-standing sell-side tradition, and at Christmas time, you don’t change traditions. The real way to do it, however, is to way a few weeks into January to see where the dust settles and how investors vote with their money in the early sessions of the year. I thus present the Alpha Sources version; five key questions for 2023, and as many answers. I’ll start with the war in Russia, asking what in fact Russia will achieve, if anything. I then ask whether 60/40 portfolio will rebound in 2023, and whether the leadership in global equities is changing. I then qualify my answer with a question on geopolitics and the free flow of goods and capital between China and the US, before asking whether Covid is over.
Read MoreThe most significant change across my favourite market charts in the past few weeks is the fact that the US 60/40 portfolio is now eking out a small positive gain on a six-month basis. Chart 01 shows that my in-house 60/40 index—using the S&P 500 and the US 10y note—is now posting six-month returns to the tune of just over 1%. This reversal from a nadir in six-month returns of almost -20% earlier this year is driven by both stocks and bonds. The S&P 500 is up a bit over 10% since mid-October, and ten-year yields are off their highs. This, in turn, invites the question of whether we’re seeing the beginning of a reversal in the decline in stocks, and rise in yields, which have haunted investors this year. I wish I knew. To get at an answer to the question, however, it’s best to separate the equity story from the bond market story, at least to begin with.
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