The following is a fascinating map showing the travel times from London to the rest of the world in 1881 produced by the Royal Geographical Society. In those days London was the center of the universe. Even in those days all of Europe was reachable within 10 days. The travel time from London to the east and midwest of the US took 10 to 20 days.
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Source: Royal Geographical Society via Reddit
US equity markets tend to perform better when a democrat is president than a republican president. During republican administrations economy tend to be stagnant or have lackluster growth. During democrat presidents’ administrations the economy tends to grow leading to higher stock market returns.
From an article in FT Alphaville quoting a recent working paper by Lubos Pastor and Pietro Veronesi of Chicago’s Booth School of Business:
Stock market returns in the United States exhibit a striking pattern: they are much higher under Democratic presidents than under Republican ones. From 1927 to 2015, the average excess market return under Democratic presidents is 10.7% per year, whereas under Republican presidents, it is only −0.2% per year. The difference, almost 11% per year, is highly significant both economically and statistically
And here’s a neat chart our graphics team put together showing the S&P 500’s performance under various presidents, going all the way back to 1970:
Figuring out why Dems garner the best returns has largely escaped academia, leading to economists dubbing the issue the “presidential puzzle”. (There is also a significant gap in GDP growth — 3.2 per cent, in case you were wondering.)
Pastor and Veronesi reckon it’s all about timing. Republican presidents often get elected when expected returns are low and vice versa. This is because Democrat presidents tend to take office when the economy is weak, and therefore risk aversion is high. As the economy recovers, consumers and businesses begin to regain confidence, and take on more risk — whether in the form of spending, or investment.
A great example would be Obama’s presidency. He inherited a distressed economy and stock market off Dubya which, arguably, would always recover. Still, a return of 182 per cent in the S&P 500 is nothing to be sniffed at. (We also note that many predicted a further stock market crash under Obama in 2008, but there we go.)
Source: Masters of the universe, don’t be scared of Elizabeth Warren, FT Alphaville
In the modern economy, the rich keep getting richer while the poor getting poorer. Inequality in wealth and income has been growing for many decades now and the wealth disparity between the haves and have-nots is especially wider in developing countries. In many developed countries also, wealth is becoming highly concentrated with a small group of elites owning most of the wealth. Similar to developing countries, social ills like corruption, regulatory capture, favorable political and tax systems, etc. have become common in advanced countries leading to the current situation.
That being said, the following chart shows the share of a country’s wealth held by the top 1% and 10%:
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Source: RFE/RL
Formerly communist Russia, takes the number rank for wealth concentration. The top 10% there own over 82% of the wealth with just the top 1% owing over 58% of that figure. These numbers are astonishing indeed. How times have changed !
The top six countries in this list are developing countries. India took the fourth spot. Chile which came in at number six is currently experiencing violent protests due to extreme inequality and its impacts.
In the US the top 1% owns more than one-third of the wealth.
The important question is this: If most of the wealth of a country is owned by a handful or a small group, is that a good thing for the country?
The UK used to be a super power ruling many countries of the world. Nowadays UK has become an also ran country. The country is not a leader in technology. In defense, it is generally considered a poodle of the US. Economically the country has bogged down in the Brexit morass for the past few years. Similar to the Greek sovereign debt crisis that lasted many years the current Brexit saga continues like a cruel British joke with no end in sight. In some ways, the country has become the laughing stock of the world.
In the latest development, UK is set for a new election on December 12th. From an article in the BBC:
The UK is set to go to the polls on 12 December after MPs backed Boris Johnson’s call for an election following months of Brexit deadlock.
By a margin of 438 votes to 20, the House of Commons approved legislation paving the way for the first December election since 1923.
The bill is still to be approved by the Lords but could become law by the end of the week.
If that happens, there will be a five-week campaign up to polling day.
The prime minister has said the public must be “given a choice” over the future of Brexit and the country.
Mr Johnson hopes the election will give him a fresh mandate for his Brexit deal and break the current Parliamentary deadlock, which has led to the UK’s exit being further delayed to 31 January.
Source: UK set for 12 December general election after MPs’ vote, The BBC
From an equity market performance perspective, British stocks have lagged all the other developed markets over the past decade as the following chart shows:
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Source: FTSE 100 loses earnings momentum again by Russ Mould, Shares Magazine
An excerpt from the above piece:
PRICE MUST BE RIGHT
The good news is that it is possible to make a case for UK equities being cheap, especially after a period of underperformance on the global stage that pre-dates the summer 2016 EU referendum vote by some distance. Over the past 10 years, the UK stock market, as benchmarked by the FTSE All-Share has provided a total return in sterling terms of 104%.
That lags not just the rip-roaring US equity market but Japan, Asia and even Western Europe as well (with sterling’s decline playing part). UK equities have outperformed only emerging markets, not developed ones.
As a result of this moderate showing, it can be said that UK equities look cheap relative to their international peers and to their own history on just 12.7 times forward earnings for 2020, with a dividend yield of 4.6%.
That dividend yield in particular may catch the eye of income-seekers, as it is the highest figure on offer from any of the eight major geographic equity market options and represents a premium of more than four hundred basis points (or four percentage points) relative to the benchmark 10-year Gilt yield.
Investors need to ask themselves: are the earnings and dividend forecasts which underpin those tempting valuation metrics any good?
Global investors have avoided the British market like the plague due to uncertainty over Brexit. it remains to be seen if these investors turn their attention back to the UK anytime soon.
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Disclosure: No positions
