2020 has been a historic year in many ways and when it comes to IPO activity, it is no different. This year, the world has seen the highest IPO capital raising activity in a decade, with USD 331 billion raised across 1,591 listings.
Azad Zangana (Schroders) | As promised at the previous Governing Council meeting, the European Central Bank (ECB) has today announced additional stimulus to aid the economic recovery. This follows the new restrictions introduced last month to stop the spread of the coronavirus. The pandemic emergency purchase programme (PEPP) will be expanded by €500 billion to a total of €1.85 trillion. Purchases will be extended to at least the end of March 2022.
Flosbach von Storch | National debt-to-GDP ratios have already reached historic highs. Gross national debt will likely exceed 260 per cent of GDP in Japan by the end of the year, and reach around 140 per cent in the USA and around 100 per cent in the eurozone. Concerns about the high level of debt being unsustainable in the long run are at least theoretically unjustifiable as long as interest rates and government bond yields remain close to zero. This is because zero interest rates allow practically any deficit or mountain of debt to be easily funded.
Peter Isackson | In a New York Times article that appeared just before this week’s interminable presidential cliff-hanger of an election, Lisa Lerer pondered how things might unfold after a Biden victory. She and the rest of the US punditry thought at the time that it might be decisive enough to define the future of the nation. Lerer cites Representative Pramila Jayapal’s speculation that Biden’s triumph could inaugurate an era of spectacular reform: “A White House victory would give Mr. Biden a mandate to push for more sweeping overhauls.”
The election count is continuing and the chances of the Democrat candidate reaching the White House are increasing. Although with a much tighter result than the polls predicted, Joe Biden wins in the key states of Wisconsin and Michigan, as well as being ahead in Arizona and Nevada. The latest recount gives Biden 264 and Trump 214. Despite the result, Donald Trump is announcing he will file several complaints in these key states, demanding new recounts and threatening to go to the Supreme Court.
With the counting still to be completed (some states like Pennsylvania and Michigan will continue to count votes until the end of the week), the candidates are very tied (238 Biden vs 213 Trump) against Biden’s victory that had been discounting the markets. Breaking all the democratic rules, Donald Trump calls himself the winner and asks that the postal ballot count be stopped (about 5 million votes), since it is a “fraud to the American public” and “an embarrassment to our country”.
Joe Biden is the clear favourite to win the US elections, with in addition a fair chance of a “blue wave”. In the opinion of Gilles Möec, chief economist at AXA IM, given the need of another fiscal push, in the short term, it is probably the optimal outcome for the market especially if the results come quickly. Questions on the long-term US policy stance will come later.
Historically, a large portion of the US wealth is concentrated in the hands of a few people. According to data from the Tax Policy Center, about 80% of the capital gains go to the wealthiest 5% of taxpayers. 69% go to the top 1% of taxpayers. Biden’s current proposal calls for those earning more than $1mln to have long term cap gains and qualified dividends be taxed as ordinary income. This would mean a tax increase from 0% -20% (depending on taxpayer’s income) to 39.6% – the current proposal for the top bracket under Biden’s outline. How impactful will this be?
Analysts have warned cryptoassets such as bitcoin and ethereum could be in for a bout of volatility come Friday when nearly $2 billion-worth of options contracts expire, according to Forbes. The data, provided by Skew, suggests the level of options contracts has tripled in the past three months to $1.9 billion in total. Around $1 billion of this is focused on bitcoin alone, with many contracts set between $11,000 and $12,000, higher than bitcoin’s current dollar prices.