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Insight - Making Sense of the Narrative

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As we see another hit to Equities today, I note comments already arriving saying the FTSE100 is now below where it was 20 years ago.

The immediate impact of the emergency cut in rates by the Band of England has been to cap sterling’s strength against the $ and compound its recent weakness against the Euro in a race to the bottom on relative cash returns.

The markets are largely behaving like q4 2018, but economically the virus is causing a working capital crisis more like 2008.

In the last post (Market Thinking February) we noted how the traders were anticipating an interest rate cut, which duly arrived to much ‘surprise’, but that we were nervous about a shift in sentiment by long term investors who would flip from a recent history of buying dips to selling rallies regardless of how bad (or indeed good) the economic data turns out to be. We remain of that view.

The fundamentals of Corona Virus matter less in the short term than the reality of the official response to it.

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