US elections: More Blue than you think!
With the victories in Michigan, Wisconsin, and Pennsylvania, most news agency (including Fox) have declared Biden as the new US President with (most likely) 306 electoral votes. Results seem then more Blue than initially thought, though we are likely to know what happens to the Senate just in January. Some noise regarding a potential elections contest is likely to stay, though with wide numbers it may lose appeal for Republican Congressmen. A Biden Presidency with a split Congress will continue to support non-US assets, particularly Europe and emerging markets.
Rates: Central banks are still in town.
Recent market sessions suggest a renewed focus on low rates. Should the US Congress be in a prolonged fiscal gridlock, markets will continue to rely on monetary policy. Global central banks are likely to play ball, with the BOE having increased QE last week and expectations set for higher ECB purchases in December. The Fed remained cautious last week but increased purchases and a more explicit focus on the yield curve remain part of the toolkit.
China: Winning stream.
We continue to believe China and the Chinese Asian complex are winners from recent global developments. A better approach to the pandemic and a reduced pressure from the White House are likely to prove strong tailwinds. The gap between China and US growth has increased from 4% in 2019 to 6% in 2020, and is likely to remain high in 2021. Asia currencies and equity markets (China, Korea, Taiwan) will remain strongly supported, especially as portfolio flows are likely to pick up over the next 12 months.
Turkey: House of Cards.
Over the weekend, the Turkish government announced a new Central Bank governor, and the Finance Minister resigned. A sudden change in the economic leadership may signal some urgency in tackling the recent lira volatility. The new CBT may hike rates, but risks around the country remain high, as a large hike would slow USD demand but won’t help replenishing reserves, and the international stance in Ankara is unlikely to change. We remain cautious on the country.
To read more on our latest views, please see our Silver Bullet | The Anti-Bubble Portfolio or visit our Insights section.
This document is issued by Algebris (UK) Limited. The information contained herein may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of Algebris (UK) Limited.
Algebris (UK) Limited is authorised and Regulated in the UK by the Financial Conduct Authority. The information and opinions contained in this document are for background purposes only, do not purport to be full or complete and do not constitute investment advice. Under no circumstances should any part of this document be construed as an offering or solicitation of any offer of any fund managed by Algebris (UK) Limited. Any investment in the products referred to in this document should only be made on the basis of the relevant prospectus. This information does not constitute Investment Research, nor a Research Recommendation. Algebris (UK) Limited is not hereby arranging or agreeing to arrange any transaction in any investment whatsoever or otherwise undertaking any activity requiring authorisation under the Financial Services and Markets Act 2000.
No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this document by any of Algebris (UK) Limited , its members, employees or affiliates and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions.
The distribution of this document may be restricted in certain jurisdictions. The above information is for general guidance only, and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. This document is for private circulation to professional investors only.
© 2020 Algebris (UK) Limited. All Rights Reserved. 4th Floor, 1 St James’s Market, SW1Y 4AH.
