RE: Shale6 Jul 2023 19:30
Bummer of a day!
US pay rolls came in at near double expected = hawkish Fed!
So even though they intimated an interest rate taper it could now be more bullish. It’s not like the US economy is overheating to quote Keynes’ ‘animal instincts!’ Rates are rising due to supply side constraints!
So lots of buyers for fewer stuff and the stuff that’s there is stuck!
But what sets the US aside in particularly from the UK is we have added red tape by things like Brexit duplication, additional ‘watery’ trade deals and even what we did well before we have offshored or friendshored over the last 20 years! Like energy, food, fish, shipping which we had in abundance on our island! Now we have even managed to fk up the golden goose - financial services and we don’t have enough water ffs!
However, at least the US have pursued some autonomous path, decoupling its industry and developing its own resources. They also lead the way with technology another area we used to thrive at especially biotech but even now many of our listed companies move to US!
My point is not political as each govt here has fkd it up due to our short termism (why we don’t have a sovereign wealth fund)! It’s from an investment perspective that I view the US as a better place to invest and DEC is at the heart of that economy!
DEC have been hit again with the market kickback regarding potential rate rises. However, had the jobs numbers come in softer then we would be dammed with the fear of recession!
But we have massive resilience at this level mainly from our ‘total addressable market (TAM’) that has significantly increased with Europe, even if that means a double shuffle! We also have fx tailwinds from king USD! So whilst both economies use interest rates to prop their currencies to make stuff appear cheaper it’s the US that actually produces stuff.! There comes a point where the market doesn’t believe govt bonds are worth the risk. That is much less likely in the US than the UK because of the underlying macro!
DEC have the hedging policy and of course the dividend. But as always it depends on one’s average and timescales. As I have mentioned before I have balanced DEC income, with TXP’s hopefully growth! But I am pretty convinced both will do well over the next 5 years! Unless one is lucky it takes years of investing and research to find two companies that meets one’s needs and I have backed my convictions.
A bumpy few days but all it takes is one snippet from the Fed one deal in Ukraine and things can turn rapidly! But at lest we should get our money back here over 5.5 years with this yield!
GL
Usual caveats
Trek
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