The World In A Week – Nul Points

Global equity markets ended the week marginally negative, but under the bonnet there was a high degree of volatility over the five trading days, with the S&P 500 in the US down over -2.5% at one point, only to bounce back strongly and end a smidge below its all-time high.

Much of the volatility was driven early in the week by the crypto meltdown.  We saw the Chinese government continue to crack down on cryptocurrencies, banning financial services and payment companies from providing services related to crypto by stopping trading, clearing, and settling via crypto. The Government said, “cryptocurrencies are not supported by real value” and warned private investors against speculative trading.  At the same time, we saw Elon Musk, owner of Tesla, perform a 180-degree U-turn on the asset class, suspending vehicle purchases via Bitcoin, citing climate change concerns as the reason. Furthermore, there is the threat of a possible tax clampdown in the US.  As a store of wealth or viable form of money, these headwinds are causing the huge degrees of volatility we are seeing and must really make the most ardent supporters’ waiver.

There has been speculation whirling for a while, but Amazon is now reported to be making a $9bn bid for MGM, which might put a fresh shine on some old classics.  Amazon has over 200 million Prime subscribers, of which 175 million stream Prime Video, according to CEO Jeff Bezos.  MGM has a huge back catalogue of content covering over 4,000 titles with household names such as James Bond, The Hobbit and Rocky.  A profitable and expanding franchise for the Amazon empire.

Mergers and Acquisitions (M&A) was also evident in the UK, with private equity firm KKR bidding £2bn for John Laing, the UK infrastructure company.  M&A is a theme we have seen at play in the UK market over the last few months as UK assets look cheap and offer good value to potential buyers, one of the reasons that Beaufort Investment decided to increase its UK equity allocation from neutral to overweight back in February.

Finally, coming to the biggest shock or non-shock of the week – the UK’s entry scored ‘nul points’ in the Eurovision song contest leaving the UK, the Brexit bad boys, left out in the cold….. Hardly market moving, but all good harmless fun, watched by millions across the continent.

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