Last week the US market closed at all-time highs and this could not have come at a better time, heading into the 4^th of July weekend marking the 245^th Independence Day.  Last Friday saw US Payroll data beating analyst expectations significantly, as the US added 850,000 new positions in June, demonstrating a strong bounce back in the world’s largest economy. Compelling economic data resulted in the seventh straight day of trading that saw the S&P 500 close at a record, which is the longest streak since 1997.

The US accounts for 25% of global GDP, and this has risen from 21% over the last 10 years, becoming a more dominant market leader.  Developments in technology integration and the semi-permanent shift to a digital age have underpinned this with the emergence of leading cloud-computing, e-commerce, and software companies.  The MSCI World Index is also largely tilted towards the US and represents approximately 54% of the index.  Easy access to capital has fuelled increased levels of borrowing which has produced numerous new zombie companies which only generate enough income to payback the interest on their borrowings. The number of zombie companies in the US has increased from 6% to 20% over the last 10 years.  Ahead, there are numerous headwinds for the US which include the growing levels of debt the Federal Reserve is willing to take up, the emergence of China / emerging nations and, as we have seen of late, that markets are becoming more disciplined towards relative valuations.  These all amount to numerous hurdles for the US to overcome.

Elsewhere, the UK reclaimed its status as Europe’s largest share-trading centre, reclaiming the title back from Amsterdam.  This change in status is largely derived from the resumption of the UK trading in Swiss stocks which was reintroduced as the UK left the EU.  According to CBOE Global Markets, London experienced an average of €8.9bn of share deals in June, compared to €8.8bn on Dutch exchanges, and has emerged as the dominant trading centre in Europe once again.

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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete.  Unless otherwise specified all information is produced as of 5^th July 2021.

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