Weekly Newsletters

26 June 2020 | William Buckhurst

That Was The Week That Was

MACRO

  • In the UK, Boris Johnson announced that hospitality businesses such as pubs, bars and restaurants can re-open on July 4th under certain restrictions
  • In the US election, polls show Biden a long way ahead in six critical swing states
  • Following annual stress tests, the Federal Reserve ordered US banks to cap dividends and suspend share buybacks to conserve funds

STATISTIC OF THE WEEK

Bank of England data shows that household balance sheets are in good nick as £30bn was saved in March and April, three times as much as in January and February; and that £7.4bn of outstanding consumer loans were repaid in April alone

COMPANY NEWS

  • Facebook had a bad week as a series of high-profile companies pulled advertising on the social media site, citing Facebook’s lack of response to hate speech on their platforms
  • Tesco showed strong like for like sales growth over the quarter but this was offset by increased spend on hiring temporary staff and preparing stores for lockdown
  • Nike reported a 38% drop in sales over the last quarter as mass closures of physical stores overshadowed surging demand online

SMALL-CAP NEWS

Following impressive results last week, we had a call with the management of Volex who produce power cords for clients such as Tesla, Dyson and Philips. They seem to have positioned themselves in growing sub sectors (experiencing revenue uplift even through the Covid crisis) and expect to see more growth and margin expansion both organically and through M&A.

FUNDS

An update from a new boutique UK small cap manager showed us data suggesting that the size of a fund can have a significantly detrimental effect on performance.  They estimate that 487 companies out of 765 small cap index constituents are largely off the radar for the larger funds that are unable to build meaningful positions in these smaller companies

THIS WEEK IN HISTORY

1914: Archduke Franz Ferdinand is murdered in Sarajevo, an event that is widely agreed to have triggered the outbreak of the First World War. The US stock market is largely unperturbed when it opens the following day, falling by just 0.11 points

2016: A surprise referendum result shows the UK voting to leave the European Union. The UK stock market opens down sharply the following morning but had recovered most of its losses within a week

LOCKDOWN LOWDOWN

Following a steep drop in ale consumption because of the pandemic, brewers in the UK have been faced with a surplus of hops. Trade groups estimate that only 40% of this year’s crop is under contract to brewers and many growers could quit the industry. This risks the loss of varieties like Goldings, which dates back to 1790, and the 170-year-old Fuggles.

MARKET DATA

% returns

1 Week

1 Month

1 Year

5 Years

UK Equities

(% return GBP)

-2.12

1.40

-15.17

8.68

World Equities                     

(% return GBP)

-1.96

2.53

5.22

75.50

10 Year US Treasury Yield

(%)

0.64

0.69

2.05

2.49

GBP/USD (fx rate)

1.23

1.23

1.27

1.57

As at 26th June 2020. Source: Financial Express

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