Thanksgiving is an Anglo-Saxon festival that is supposed to celebrate a bountiful harvest. In fact, the American pilgrims used to give thanks to God for having given them the wherewithal to feed themselves.
A bold and more materialistic analogy might today lead investors to give thanks to the equity markets that have delivered performances ranging from 20% to 30%, depending on the index and the country. The global economy has not wavered and this is expected to be evident in the robust sales expenditure of this Black Friday – another celebration, albeit one which is ever more consumer-focussed. Needless to say, this all-out advertising campaign masks some bad deals and fraudulent commercial practices. However, it is a reflection of this deflationary trend that was triggered by online sales in particular. Yet, for the first time ever, certain anti-consumerism, pro-ecology movements are hitting back with Block Friday. This tension between excessive consumption and environmental sustainability is becoming a pivotal issue for economies, as is their integration of digital technology. Bit by bit, “smart society” and its standard-bearer, the smartphone, are taking over from the old way of life and the relationship an individual has with their everyday environment. Spanish telecoms operator Telefonica has recently made this the cornerstone of its new business strategy. It sets out all the potential areas in which “smart society” could play a role; smart home, smart energy, smart health, smart cities, etc.
This is nothing ground-breaking about this; it’s just about encouraging savers to take an interest in new technologies. Technology securities are already the most valuable, especially in the United States. Furthermore, a stock-market correction of these securities is a risk for the US equity market, in particular, for 2020. Because between now and then, the operators and investors are going to let year-end play out and reap their bountiful yields.
The British elections alone could throw in an element of surprise, although the outcome is unlikely to be such as to disrupt the market balance. In all probability, 2019 will be a (very) good year. We should therefore give thanks, as after 2018 many of us were dreading darker days.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in November 29th, 2019.
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