In today’s podcast I discuss three articles which have caught my eye in the last few days which focus on:
- Will higher inequality result in a wealth tax?
- Could markets have a big year of growth in 2021? Some of the media certainly thinks so.
- Could the UK FTSE and German Dax over perform in 2021?
For your convenience, and to give credit to the original writers, I have included links to the articles I referred to and copied them below.
People who were trapped in poverty before the pandemic have suffered the most financial damage during the crisis, according to a report warning the government that more support is needed to help hard-pressed families.
The Joseph Rowntree Foundation (JRF) said those who had been struggling to make ends meet before March last year were more likely to work in precarious jobs or sectors of the economy that had been hardest hit by lockdowns.
Calling on the government to make permanent a £20 per week rise in universal credit benefit payments – which is due to be cut from the end of March – it said that many families had been pushed to the brink during the latest lockdown and had few resources left.
In its annual poverty report, the charity said struggling families would find it harder to recover from the double-dip recession triggered by the renewed restrictions and rapid growth in Covid-19 infections.
According to the research, workers on the lowest incomes experienced on average the largest cut in hours at the start of the pandemic almost a year ago, with 81% of people working in retail and accommodation recording a drop in income. More than a third of single parents working in hospitality and over a quarter of those in retail were already living in poverty before their sectors were severely hit by restrictions.
In a reflection of the uneven economic impact caused by the pandemic, the foundation said that four in 10 workers on the minimum wage faced a high risk of losing their job, compared with just 1% of workers earning more than £41,500 a year.
The warning came as unemployment in the UK is expected to rise dramatically this year after the furlough scheme comes to an end in April, and as the pandemic pushes the British economy into a double-dip recession before the vaccine can be administered widely enough to ease restrictions.
Even before the pandemic struck, causing the deepest UK recession for more than 300 years, the foundation said that millions in the UK had lived through a “decade of deprivation” with little progress made on reducing poverty, rising hardship among working households, and a steady increase in child poverty.Lives are falling apart. Enough talk about inequality, it’s now time to actKenan MalikRead more
The charity said this rise was mainly because of the Conservative government’s austerity-era benefits freeze between 2016 and 2020, which meant that benefits had not kept up with the rising cost of living. Even after taking into account the boost for universal credit – launched as a temporary measure in March last year when Covid first hit – research from the Institute for Fiscal Studies showed that out-of-work households got £1,600 per year less in benefits than they would have done before the Tory austerity drive began a decade ago.
Warning Boris Johnson’s government that it risked being defined by a record of rising poverty if action was not taken, Joseph Rowntree said tackling the issue must be a central economic priority in 2021.
It said the chancellor, Rishi Sunak, “must do the right thing” and confirm that the £20 per week uplift in universal credit would be made permanent, saying there was strong public support for this policy choice. Sunak refused to make such a commitment when answering questions from MPs in the House of Commons earlier this week.
Helen Barnard, the foundation’s director, said: “It is a damning indictment of our society that those with the least have suffered the most before the pandemic and are now being hit hardest once again by the pandemic. The government must now make the right decisions to avoid another damaging decade.”
The Treasury said it had taken steps to support those most in need during the pandemic, including raising the living wage, spending more than £100bn on safeguarding jobs, and boosting welfare benefits. “We are committed to supporting the lowest-paid families through the pandemic and beyond to ensure that nobody is left behind.”
- “Almost every single time a Wall Street analyst says a stock’s going higher, perhaps far higher, the market proves them right,” CNBC’s Jim Cramer said Tuesday.
- “There are just that many bulls out there — people who want to believe,” the “Mad Money” host said.
- “Welcome to the world of the bull market 2021, where brokerage houses routinely raise their price targets each day, often on the same stocks, and the public just laps it up,” he said.
Investment firms are making a habit of raising stock price targets and the market appears to be confirming the calls being made by analysts, CNBC’s Jim Cramer said Tuesday.
“Almost every single time a Wall Street analyst says a stock’s going higher, perhaps far higher, the market proves them right. There are just that many bulls out there — people who want to believe,” the “Mad Money” host said.
“It’s incredible that something as prosaic as price target boosts are actually moving stocks higher, the ultimate self-fulfilling prophecies,” he said.
The comments came after major U.S. averages clawed back some of their losses Monday. The Dow Jones Industrial Average picked up 60 points to close at 31,068.69 with a gain of 0.19%. The S&P 500 inched up 0.04% to 3,801.19, and the Nasdaq Composite rose 0.28% to a 13,072.43 close.
“Welcome to the world of the bull market 2021, where brokerage houses routinely raise their price targets each day, often on the same stocks, and the public just laps it up,” Cramer said.
After the coronavirus pandemic and lockdowns last year led analysts to slash corporate estimates and price targets across various sectors, they are reassessing the path forward for businesses as they and the broader economy attempt to recover from recession, he said.
“Instead of a vicious cycle down the drain, we got a quick pivot, followed by what’s known as a virtuous cycle higher, led by the endless, ready-made price target boosts that Wall Street’s so good at,” he added.
Cramer said recent calls being made in research notes are fueled in part by last year’s historic government intervention, including by Congress and the Federal Reserve, in the first half of 2020 to absorb some of the economic fallout from coronavirus lockdowns. Cramer called it the “most effective federal response to a recession in living memory.”
The stock market recovered from the February-March meltdown and returned to new highs later in 2020 as Covid-19 developments sparked optimism on Wall Street about a V-shaped economic recovery.
“This moment is a nightmare for the bears but nirvana for the bulls, especially with the government finally pushing to vaccinate everyone over 65,” Cramer said. “As long as the virtuous circle of number bumps … keeps propelling stocks higher, you’ve gotta stick with the bull market.”
Both the FTSE and the DAX have underperformed in recent years, but both are strongly aligned with the global economic recovery and offer relatively good value against other major indices, Goldman Sachs Senior European Equity Strategist Sharon Bell told CNBC.
LONDON — Goldman Sachs has backed Britain’s FTSE 100 and Germany’s DAX to outperform in a resurgent year for European equities.
European markets got off to a solid start in 2021, with the rollout of Covid-19 vaccines, a Brexit deal and Democratic control of all three branches of the U.S. government giving investors hope for a robust economic recovery.
The pan-European Stoxx 600 was up around 2.4% year-to-date as of Tuesday afternoon, despite containment measures being implemented in a host of major economies, most notably a strict nationwide lockdown in England.
Given the slow start to vaccine rollouts and the likelihood that the new strain of the virus will ripple through the euro area, with tighter containment measures extending into February, Goldman economists now forecast a -0.1% contraction across the euro area in the first quarter of 2021, with a sharper -1.5% “double-dip recession” in the U.K.
The combination of this and adjustments to new trade barriers after the U.K.’s formal departure from the EU on January 1 renders the short-term economic outlook negative, but Sharon Bell, senior European equity strategist at Goldman Sachs, told CNBC on Tuesday that Britain’s FTSE 100 index was a “very different beast,” with around 80% of FTSE 100 sales non-U.K.
Globally, Goldman expects an annual GDP (gross domestic product) expansion of around 6.5%, above the consensus, and Bell said FTSE 100 companies with their significant international exposure will benefit from that.
“The second reason for us as well as that international exposure is just that this has become a very value-orientated index. It’s relatively cheap versus the S&P 500, for example, even versus the European markets it has got a lot of the sector exposure that has been very unloved in recent years like financials and commodities, and we think those could come back,” she told CNBC’s “Street Signs Europe.”
Goldman is also recommending investors go long on Germany’s DAX for similar reasons, for like the FTSE 100, it has underperformed in recent years and is similarly aligned with the health of global growth.
“The DAX is also quite inexpensive versus the rest of Europe, not quite as much of a discount as the FTSE 100 in the U.K. is, but the DAX also is on a modest discount to the rest of Europe,” she said.
“It’s a function of those two things: we think of them as being value indices and we also think of them as being very geared to global economic pickup.”
Vaccine and stimulus hopes
In a research note Sunday, Goldman Sachs Chief European Economist Sven Jari Stehn highlighted a series of questions which could determine the trajectory of the European recovery, notably whether after a volatile first quarter, the ramping up of vaccinations will unlock pent up services spending in the spring.
The European Union has secured a further 300 million doses of the Pfizer and BioNTech vaccine. Moderna’s option has now been approved in the U.K., leading Goldman to estimate that 50% of the population will receive the first vaccine dose by April and June in the U.K. and euro area, respectively.
This will allow for a gradual reopening of economies from March and a sharp increase in activity in the second quarter, the bank predicts.
“In light of the renewed weakness during the winter, we estimate that euro area real GDP (gross domestic product) will be 5.5% below its pre-Covid level by the end of Q1, ranging from –4.8% in Germany to –8.9% in Spain,” Stehn wrote.
“Given this pent-up demand—predominantly in services—and the Q3 experience of last year, we maintain our forecast for a sharp pick-up in real GDP growth across Europe in Q2, to +2.7% for the euro area and +5% in the U.K.”
Much of the recovery for global stock markets since the March 2020 crash has been driven by unprecedented fiscal and monetary stimulus from governments and central banks, and Goldman expects fiscal policy to remain highly accommodative through 2021.
Stehn suggested that a vaccine-led bounceback in services, expansionary fiscal policy and a “supportive global environment” with U.S. forecasts upgraded following the Democratic victories in the Georgia Senate runoff, will lead global growth to outstrip consensus forecast this year.
Goldman projects euro area real GDP growth of 5.2% for 2021 and 4% for 2022, both significantly above consensus, with the bloc’s economy returning to its pre-crisis level at the end of this year.
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In the article below I answered three questions:
- Is investing in oil sensible? How about oil stocks?
- Is Buffett getting poorer or just getting overtaken by other billionaires?
- How much does it really cost for an expat to live in Beijing or Shanghai?
- Are there any advantages to growing up poor?
To read more click below.