An Indian Summer: Immigrant’s child becomes Vice President!

Well, the US Election results finally resolved over the weekend with the Biden/Harris team making history. Joe Biden has gone from being one of the youngest senators in the US following his first election in 1972 to being the oldest person to assume the presidency in 2021.

His almost 50 years in political office has meant that he has developed good relationships on Capitol Hill. He will need these relationships to reach across the partisan divide and ensure that his legislative reforms are not hamstrung by a Senate controlled by Republicans.

The other piece of history made was the election of what will be the first female Vice-President of the USA. Also, Jill Biden will be the first FLOTUS to continue to hold down a day job! What a time to be alive!

The issue of Kamala Harris’ mixed ancestry is certainly also a point to note simply because it underscores the importance of diversity. Ms. Harris’ mother was an immigrant, arriving in the US from India in 1958). As an immigrant myself, this makes me proud because it shows how immigrants can integrate into societies and raise families with a strong sense of civic pride and a culture of service. See this piece I wrote last week about immigration in Canada and what it currently looks like.

The Biden/Harris team’s work is cut out for this as they now set themselves to the task of healing a fractured nation while battling the ravages of a global pandemic which continues to see case number rise in the US and many other parts of the world. These challenges will make dealing with Trump lawsuits and a still outstanding concession on the election pale in comparison.

You’re Fired!

President Trump wasn’t the only high-profile person to be fired this week. On Friday, the President of Turkey, Recep Tayyip Erdogan fired his central bank governor and accepted the resignation of his finance minister (son in law). This extended (and arguably was also a result of) a selloff in the Lira. TRYUSD reached levels of around TRY8.50/$ in late trade, its all-time weakest level before paring back this morning on generally upbeat global risk appetite.

Over the last 10 years, the lira has depreciated by an average annualized rate of 18.5% per year. This is staggering considering that Turkey, like many emerging markets, remains dependent on foreign capital flows to fund its deficits.

Whether the recent lira weakness will mean more interest rate hikes in Turkey will need to be seen although it has seen Turkey on the opposite side of many global central banks who continue to keep the monetary taps open.

Small open emerging markets (like Turkey and South Africa,etc) would do well to keep the uncertainty risk premium low and follow well communicated strategies and structural reforms to ensure that their own currencies do not ‘free fall’ and exert unnecessary hardship and inflation on their citizenry and economies.  

Keep posted on the blog later this week as I update my view on the dollar weakness which has helped emerging market currencies. I will also update my ‘fair value’ on the rand which is currently on track to be one of the best performing EM FX for the year to date.

Keeping the Markets  well ‘FED:’

Not many people noticed but last week the most powerful man in America did nothing. No, I’m not talking about Trump playing golf while losing an election. I am talking about Jerome Powell, the Chairman of the US Federal Reserve (FED), who announced to changes to the FED’s money printing stimulus programs.

The Fed also remains committed to keeping rates low and to target average inflation around 2%. Why is this important? Well the US hasn’t had inflation for many years now. To get average inflation to 2%, it is likely that the FED will keep rates low even if inflation rises above the 2% target for some time.

This coupled with easy policy around the world (the Bank of England also kept it accommodative stance), is likely to keep general liquidity conditions awash and support asset prices.

A decent US jobs number last week showed that unemployment fell as 638 000 jobs were added last month. That said, it is still a long way to go to offset the millions who were unemployed following the COVID related layoffs and will depend heavily on whether the newly elected team in the White House can put together and push through additional support programs for consumers and businesses alike.

‘No certainty in life but death and taxes’

What are the market expectations around a Biden presidency and how will the administration look to pay for the stimulus measures as well as the ambitious social assistance programs?

Firstly, Biden ran on the promise to increase taxes on the wealthy. This will likely see proposals to tax top income earners at 43% and also scrapping tax breaks for capital gains and dividends.

Will this have an impact on investors who have been piling into stocks and could it present a headwind? Possibly, but the likely gridlock in the Senate couple with new reports from Pfizer about a possible vaccine are seeing US stocks up this morning! Maybe no death and taxes!

What will we know and what are we watching this week?

Earnings from McDonalds today – surely today’s number won’t reflect any binge eating from soon to be unemployed White House staff?

Microsoft X Box launch vs. Sony Playstation launch – it’s the showdown but the real winner here are gaming revenues. I like this sector a lot and will probably write a bit more about it in future posts.

Climate change – After our first snow flurries in Ontario two weeks ago, we are now back up to temperatures above 20 Celsius. I am not complaining but this sets a record for the highest November temperatures in Toronto since 1938!

Climate change is real and I for one am looking forward to the Biden Administration’s rejoining of the Paris Climate Accord. Will it impact energy stocks, very likely. But I would take that impact over the existential risk to all life on the planet any day! For now, I am enjoying the ‘Indian Summer’ (last warm weather before winter, not a Kamala Harris reference).

For now, I am enjoying the ‘Indian Summer’ (last warm weather before winter, not a Kamala Harris reference) and watching the markets rise to records, much like our temperatures!

Keep up to date by following me on Twitter for more punchy commentary and reach out on LinkedIn to stay connected. 

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Our content is intended to be used and must be used for informational purposes only. You must do your own analysis before executing any investments or strategic decisions, based on your own circumstances. We do not provide personalised recommendations or views as to whether an investment approach or corporate strategy is suited to the needs of a specific individual or entity.

You should take independent financial advice from a suitably qualified individual who gives due regard to your personal circumstances.

Whilst every care is taken, we accept no responsibility or liability for any errors or omissions in any of our content.

The views, thoughts and opinions expressed in our content belong solely to the author or quoted individuals and/or entities, and not necessarily to the author’s employer, organisation, committee or other group or individual, or any of our affiliates or brand partners. 

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Disclaimer 

Our content is intended to be used and must be used for informational purposes only. You must do your own analysis before executing any investments or strategic decisions, based on your own circumstances. We do not provide personalised recommendations or views as to whether an investment approach or corporate strategy is suited to the needs of a specific individual or entity. You should take independent financial advice from a suitably qualified individual who gives due regard to your personal circumstances. Whilst every care is taken, we accept no responsibility or liability for any errors or omissions in any of our content. The views, thoughts and opinions expressed in our content belong solely to the author or quoted individuals and/or entities, and not necessarily to the author’s employer, organisation, committee or other group or individual, or any of our affiliates or brand partners.

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