There is an old line that the Stone Age didn’t end because they ran out of Stones and just as the Dot Com crash was not caused by a collapse in the share prices of typewriter companies and fax machine manufacturers, but instead by the unwinding of the hype around the profitability of ‘the next big thing’ in Telecoms, Media and Technology (TMT), so we would suggest that there is less systematic risk from investing in ‘bad’ Fossil Fuel companies (the risk is in the price) than there is in being heavily committed to expensive ‘alternative energy’ technology that turns out not to be the next big thing after all.

The back-to-school-trade in markets is not to look at the short term forecasting uncertainties around the Delta Variant of Covid, but rather to consider the medium and longer term implications of the latest twists in the New Cold War and the implications for capital flows.

The only thing normal about this summer seems to be the seasonality around markets as they increase risk aversion in the face of of light volumes and low liquidity.

As Equities and Commodities moved higher, western investors in Chinese VIE structures got a shock as one of the hitherto ignored risks to the sector (change in Chinese policy) suddenly appeared.

The fundamentals remain intact; the Covid-Policy Induced Economic shutdown is clearly behind us, with Asia (ex Hong Kong) and the US leading the return to normality while Europe and the UK still lag. Temporary demand supply/imbalances are spiking commodity prices but this still looks more like reflation than inflation.