Tepid Tech

The Noise

• Boris Johnson and Matt Hancock have rejected claims by the Prime Minister’s former adviser, Dominic Cummings, that government mistakes led to thousands of unnecessary Covid-19 deaths. In total, 127,748 people have died in the UK within 28 days of a positive test for the disease, according to official figures at the time of writing. The Prime Minister said he had tried to minimise loss of life “at every stage”.
• US President Joe Biden has said he expects to release the results of an intelligence report on the origins of the virus in the coming days. China has denounced US efforts to further investigate whether Covid-19 came from a Chinese lab as China’s foreign ministry accused the US of “political manipulation and blame shifting”. This week, Facebook ceased to flag posts labelling the virus as man-made.
• A new batch of $1,400 stimulus checks has been sent to Americans who filed tax returns, bringing the total number of payments to almost 167 million, for a total amount of approximately $391 billion.

The Numbers

Markets were relatively quiet this week, as largely positive economic news flow did little to move asset prices in one direction or the other. Equities advanced slightly on a New York Times report claiming that US President Biden will seek $6 trillion in US spending in the next fiscal year; the White House will unveil its full proposal later today. More spending is perhaps not much of a surprise but it does at least provide further evidence that the flood of support is likely to persist for the foreseeable future.

Data released this week also showed US unemployment indicators falling and orders for business equipment beating forecasts, both signs that the economy is putting more labour to use and ramping up its capital investment. This kind of data provides a particular boost to cyclical and defensive stocks that tend to benefit from strong economic conditions. Indeed, this week has seen cyclical industries (those whose success tends to be well correlated with economic strength) benefit whilst tech has retreated slightly.

Since tech’s headline-grabbing strength last year, the bull market in negative-earnings, fast-growth businesses has moderated significantly this year. Our valuation discipline has steered us away from such businesses thus largely allowing us to avoid this retreat. Where we do have technology exposure, it is to companies with proven business models, resilient balance sheets and runways for growth supported by strong long-term trends.

For those of you who relish in a sip of a full-bodied Merlot, a night of wild dreams following over-enthusiastic cheese board indulgence may be nothing new. Carl Stewart, a drug dealer identified by police after sharing a photograph of himself holding a block of cheese would certainly agree. Now I think we can all agree that having passions away from the workplace is key to wellbeing and fulfilment, especially when evading the authorities is your nine-to-five, but maybe Carl should give yoga a try.

Source: theguardian.com