Hotel California

Not a reference to the appalling wildfires around the inappropriately named town of Paradise but a Brexit reference to the May deal – ‘you can check out but you might never leave’, a modest adaptation of the lyrics from that classic song by The Eagles. Writing the mid-monthly update during a tumultuous period in British politics isn’t the easiest commentary task when Ministers are resigning by the hour. Unsurprisingly, markets, not least Sterling, have been spooked by the increased prospect of a change of government. The rest of November promises to be interesting.
Red October
Sean Connery was a fine actor. Although he is still with us, I haven’t seen any cinematic output from him in a while. As a James Bond fan, he was the best 007 until Daniel Craig challenged his supremacy, in my opinion. Of course, Sean made many terrific films, like The Untouchables, playing the part of an Irish/American cop with a Scottish accent. His accent would be a natural advantage as I looked forward to watching him in Highlander – until I realised he was playing a Spanish nobleman! Another fine performance was as a Russian submarine commander in The Hunt for Red October (with a Scottish accent of course).

Well, we definitely had a red October with most assets delivering negative returns and equities, especially technology related stocks, leading the way. Like Sean Connery’s acting voice, October was a bit one-dimensional. Anything tech-related got hit as the bungee valuation of the FAANGs (Facebook, Amazon, Apple, Netflix and Google (Alphabet)) got stretched a bit too far. Passive buyers, indiscriminate purchasers on the way up, did a u-turn and became sellers. As often happens in short periods of increased volatility, correlation of assets increases. Whether it was the rising cost of capital, referenced by ten year US Treasury yields above 3.2% or rising hourly earnings within a tight labour market (it’s happening in the UK too), the markets took fright recovering marginally at the end of the month in time for Halloween.
Consequently some strange things happened. For example, labour intensive businesses outperformed those companies with significantly less labour exposure.


Additional sources: @markets & The Wall Street Journal

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