Too much uncertainty, too much introspection; while the world roars by.

Expecting either Blair Mark II or Trump Mark II still feels unwise. As does the Franco-German led ostrich ensemble, burying its head in debt, not sand. And CrowdStrike highlights forgotten fragility.

Which leaves me uneasy. Markets have done very nicely since last autumn, but now feel as if they’re too dependent on delayed gratification, too relaxed about political earthquakes. I could do with more visibility, not just on who is elected, but what they do after elections.

So far this year, performance has come from the US, especially NASDAQ, which our momentum model recently sold for the first time in a year. Admittedly simply to correct an overweight, a substantive sell appears a way off, but a reminder that the ability just to buy US tech is diminishing. And markets need buyers to move up.

The market assumption seems to be the rally will broaden  and move into the smaller stocks and round the globe. Possibly, certainly liquidity is plentiful, bitcoin and gold look high, a good indicator that there is excess cash about.

But the other source of cash, shifting out of term deposits and money market funds, has to now be slower, if we have replaced six US rate cuts this year with two. There really is no obvious reason not to just stay liquid, for a while. The dollar is also weaker, it has slid in fits and starts, but that also mounts up. Owning a depreciating currency is never great. It remains quite sensitive to short term rate differentials.

The global position is still inflationary, with no major developed economy addressing it’s out of control spending plans, all hiding behind each other’s failures.

Trouble comes when rational investors no longer accept out of kilter valuations, including for all three favoured assets, gold, bitcoin, US tech.

The US outlook – conflicted?

I also, I confess irrationally, do not expect either Trump or Biden in the White House next year, nor do I expect that much change down the ticket now. So, to the degree that the US market is rallying on Trump’s current resurgence, I find that dangerous too.

Polite society, and especially the UK fund manager, is caught between the social need to say Trump is evil incarnate and the reality that investors quite like the prospect. So, they concoct lists of the harm he will do, like cutting taxes, cutting regulation, boosting energy supply, enhancing security and decide that it is all terribly inflationary and so quite bad. But after that, conscience cleared,  they amble over to their trader and buy a bit more.

This is an approach which is quite vulnerable to Biden getting turfed off the ticket. Especially with the need to then explain why the new Democrat candidate will raise taxes, reduce security, add regulation, reduce energy supplies, all of which is suddenly good for investors. An interesting pitch.

UK – Unmoved by Starmer’s Start

While in the UK, the large market indices are remarkably unmoved by Starmer’s start. At one level his King’s Speech was unremarkable. No surprises: Labour followers and unions given what they were promised, manifesto pledges kept.

Indeed, it was as if Gordon Brown and the Tories were all a bad dream, and Tony was at his desk, in 2007, working on the Queen’s Speech, which he dropped in a folder, and nailed to the back of a wardrobe door, for Keir to pick up 17 years later, change the pronouns and off we go.

How will housing engender growth?

Take housing, although how it is suddenly the engine of growth escapes me. The chances are the private sector could be the instrument to build them. But the timescale  for that effort to cut prices is very long. Although the focus on land costs is good. Faster, cheaper consenting is also needed, based on where houses people want, will sell.

While the suggested mandatory targets didn’t work under Blair, they won’t work now. They just let the blame be shifted from local planners, to Whitehall mandarins. Stuffing more and more subsidised housing into new build sites, just raises prices (someone has to pay for them).

The Tories (oddly) had a viable idea: rather than identify where you can build, first identify where you can’t. But there is no sign of that scale of thinking, or speeding up the interminable appeals process.

From this most useful website

The Commanding Heights

I assume the long-term plan is to demonstrate this old approach doesn’t work, create a crisis, then privatise something. I doubt if that weird solution will be confined to the railways, and almost certainly now to water. Just like Railtrack and British Nuclear Fuels under Blair, you legislate impossible outcomes, the private sector invariably fails, you take ownership and allow far worse outcomes (and need bigger subsidies) instead.

It also needs capital, which is being scared away from the water companies, by new harsher laws, the exact opposite of the current need.

It is as if lots of laws and smiling nicely at deep seated structural problems helps to resolve them. Here we see the old failing of opposition parties getting into power, but then wasting it fighting the last election: at least Blair, in his own right, innovated.

Stock markets simply didn’t believe the Tories and don’t believe Labour either; words alone won’t improve matters.

Although as ever because the index is so hated, that leaves some very underpriced stocks for sale.

We have no clear view of what the autumn brings, either in the US, or UK (the first Reeves budget), or Germany (although a budget has been concocted there, but seems impossible to deliver) or France, which one hopes will have sorted out a government by then at least. Macron’s current re-appointed appointee, looks highly unstable.

A lot of patches have been applied, a lot of whistling in the dark, but the money is running out. It has been for a while, but you can’t fight a war on several fronts : so, one of defence, welfare, health, or renewable energy, is not getting the funding splurge it wants.

Growth is the answer, but that, as Keynes noted, needs animal spirits. The animals look pretty caged just now, and Starmer is adding new bars to that prison.

So yes, the rate cut story holds, innovation possibly, but their heavy lifting is not supported by reforms which will help.

For our part sitting out the summer looks better.

We will resume these musings in early September. Under a new logo :

One suggested name is :

The Campden Snipe.

Thoughts, as ever, remain welcome.

In the real world, everything changes.