William Horncastle via The Conversation | The amount of money spent on US elections eclipses the annual total economic output of some small countries. The total spending by candidates, political parties and independent campaign groups in the 2016 race was US$6.5 billion – comparable to the GDP that year of Monaco, Kosovo or Liechtenstein. The 2020 election cycle is forecast to smash previous spending records, with the Center for Responsive Politics estimating it will cost US$11 billion. That would be comparable to the 2019 GDP of Equatorial Guinea or Chad.
In the World
Covid-19’s first victim continues to recover, with structural measures increasing the economy’s robustness and boosting its currency. That is not without risks, however. Lately, the People’s Bank of China (PBoC) has been valiantly trying to slow down the appreciation of its currency, the renminbi, vs. the U.S. dollar. In part by trying to encourage capital outflows. “That will not be easy,” argues Elke Speidel-Walz, our Chief Economist for Emerging Markets.
The world public deficit in 2020 stands at 12.7% of GDP, compared to its forecast of 3.9% in April, and gross public debt could increase to 100% of global GDP, says the IMF. Thus, it supports more spending and outlines scenarios in which some countries will be able to stabilize their debt, by the middle of this decade, without tax increases or budget cuts. Specifically, its estimates suggest that a public infrastructure investment of 1% of GDP could boost production by 2.7%, creating between 20 and 33 M jobs.
The islands — two north of Venezuela, one east of Puerto Rico — are on the brink of financial ruin. Without tourists, their economies have shrunk 20 percent. One in five families rely on food aid. Aruba and Curaçao cut salaries in the public sector by 12.5 percent and required a 20-percent contribution from firms to wage subsidies in order to qualify for a previous round of financial support, but it hasn’t been enough. For another cash injection, the Dutch are demanding that the islands cut red tape, liberalize labor laws and reduce the cost of doing business. The goal, Knops said, is to make their economies more resilient in the long term…
Sean Markowicz (Schroeders) | The largest US technology stocks – Apple, Microsoft, Amazon, Facebook and Google (Alphabet) – known as the “FAMAGs”, have largely benefitted from the economic fallout of the crisis, as more people rely on their technology to work and shop from home. However, their increasing dominance is raising concerns about the top-heavy composition of the US equity market and the sustainability of the tech rally.
After a lackluster September, US equities are showing buoyancy in October. The NASDAQ 100 Index is up over 2.7% while the S&P 500 Index is up over 3.4% month-to-date. While markets were initially disappointed by delays in the much-awaited US fiscal stimulus, it appears that they are now beginning to price in the strong impact it can have whenever it comes – before or after the US presidential election. Which assets stand to benefit and how could investors position themselves?
Esty Dwek (Natixis)| “Markets in general just be really happy with Biden’s lead because it’s looking less and less likely that you’re going to have a contested election which means that by November 4th, we probably know who the next president is going to be, and if it is this Democratic sweep, then we also know there’s going to be a lotof fiscal spending in 2021.”
Romain Boscher (Fidelity International) | Former US Federal Reserve Chairman Alan Greenspan is famed for describing booming markets during the dot-com bubble of the late 1990s as “irrational exuberance”. A generation later, this concept is back with a twist, and, as it happens, fuelled by the US central bank itself.
Daniel Wagner | More than 600 M Chinese already use Alibaba’s Alipay and Tencent’s WeChat Pay to pay for much of what they purchase. Both companies control approximately 90% of China’s mobile payments market, which totaled some $17 trillion in 2019. The Chinese government understands that, via Blockchain, the issuance of its own cryptocurrency is an excellent way to track and record the movement of payments, goods and people: the unsexily named Digital Currency/Electronic Payments (DCEP).
Agricultural and livestock commodities generally had another good month, but some stood out more so than others. Lean hogs made strong gains of 32.1% last month leading the group by a wide margin and entering positive territory year-to-date. In 2019, African Swine Fever in China had cut the country’s pork production by 21.3%, and a further 19% loss in production happened in the first 6 months of 2020 (on a year-on-year basis). As a result, there has been a rapid rise in pork imports notably from the US and Spain.