TODAY’S FAYRE – Sunday, 1st January 2017


“When we climbed the slopes of the cutting
We were eye-level with the white cups
Of the telegraph poles and the sizzling wires.

Like lovely freehand they curved for miles
East and miles west beyond us, sagging
Under their burden of swallows.

We were small and thought we knew nothing
Worth knowing. We thought words travelled the wires
In the shiny pouches of raindrops,

Each one seeded full with the light
Of the sky, the gleam of the lines, and ourselves
So infinitesimally scaled

We could stream through the eye of a needle.”



Seamus Heaney – poet – 1939-2013




You can call President-Elect Trump, irresponsible, ‘gung-ho’ or two spanners short of a tool box, but at least he cannot be accused of making no effort to build some sort of a relationship with President Putin – probably one of the most dangerous men on the planet. Putin may well be no more than an appalling despot, but world leaders cannot afford to adopt any degree of arrogance in the current critical circumstances and just let the Russian President run amok internationally. I have no idea if Obama is arrogant, frightened of Putin or has been consistently advised by a very weak State Department, but the US has been beaten to the punch in every international initiative since 2008. Sanctions are all very well but diplomacy is a fundamental requirement for a world leader. Obama left Messrs Clinton and Kerry to do the leader’s job! Putin has won every single global initiative in the past 8 years.


I very much enjoyed Lord King, former Governor of the Bank of England, talking last week on Radio 4’s Today Programme, putting some calm sage-like comments on the state of BREXIT. He strongly advised that the UK might find it easier leave the single market rather than negotiate a very complicated deal that might not be workable or clinical enough. Much as I agree with Lord King’s sentiments there is a danger of him doing a ‘Greenspan’ – offering advice to his successors. To date this has not happened. I believe Lord King is sensitive enough not to fall in to that trap. 


It was interesting to see that Barclays have decided to take their chance in court against the US regulators rather than accept the kind of punitive fines imposed on Deutsche Bank and Credit Suisse for miss-selling mortgaged backed securities. It is fair to say that CEO Jes Staley is an American and Barclays has fairly strong foot print in derivative trading in New York for a U.K. based bank, courtesy of the inspired decision to buy Lehman’s operation for a $1 from the smouldering embers back in 2008/9.


By any standards 2016 was a tumultuous year politically and to a lesser degree financially.  Set out below is a schedule of performance for most of the global indices last year (to 29.12.16), which in isolation only tells you part of the story.  For instance no allowance is evident for the significant level of volatility.  Nor for that matter is there any verification of the violent currency movement, which has seen Sterling drop 18% from 23rd June to the end of the year, which will inevitably trigger inflation to as high as 3% by the end of 2017.  So in essence you could say that FTSE investors lost money in 2016. Crude oil rose by almost 90% in 2016 from $30 a barrel to $57 (Brent crude).



FTSE 13.9% 16.91
DAX 6.5% 14.21
CAC 4.34% 15.41
DOW 14.03% 18,18
S&P 500 10.01% 18.93
NASDAQ 8.83% 22.6
HANG SENG -0.56% 12.02






 Figures compiled to 29th December 2016


The first 6 weeks of 2016 were dogged by dispiriting data from China, which saw GDP settle down to 6.7%.  It was the unknown and imponderable elements that severely damaged the mining and the natural resources sector, which was the trigger point for many of the main indices surrendering 10% by 11th February. The FTSE fell from 6274 to 5536 on 11th February 2016. Confidence then started to return to the fold by the middle of June, just before the first of two astonishing political events manifested themselves. On the evening of 23rd June the UK electorate shocked the world by voting to leave the EU – not by a huge margin, but a significant one.  It had become clear that society in the UK had never been more divided for many years and those ant-establishment voters certainly vented the spleens. BREXIT had two camps – Immigration, ferociously driven by Nigel Farage and UKIP and those romantics, like me, who have sadly accepted that the EU will NEVER reform and that in the long term  the UK will thrive very well with its own sovereignty, free trade and without the meddling ECJ damaging the UK’s affairs. REMAIN’S campaign was poorly run, but what has been most disappointing has been the acrid and caustic tone of the rhetoric and for BREXIT to be a success, there must be accommodation. Above all else clarity is required before the negotiations can move forward with any degree of confidence.


After that fateful night sterling fell like a stone against the Dollar and the Euro – from $1.50 to £1.25 almost at the stroke of a pen. Stock markets caved in – the FTSE fell from 6284 briefly to 5788 before closing on that fateful Friday at 6132. Having had a chance to dismiss some of the horrifying official forecasts on the UK’S economy, which at best for the next year, were little better than hysterical, it became increasingly obvious that Dollar earning stocks – 60% of FTSE constituents – would do well and so it transpired. Mining stocks rose like the proverbial grilse from overly trashed positions. Last year for example Anglo American rallied by 342% and Glencore by 179%. On the back of rising oil prices – BP added 44% and Royal Dutch Shell a very healthy 51%. If oil continues to head north there may be more in the locker. HSBC accounts in Dollars and was 20% to the good. 


The rest of the UK banking sector performed poorly thanks to PPI and other claims and fines – RBS -25%, Lloyds -13.6% and Barclays -3%. However in the last 2 months they eroded some substantial valuation losses. Drug companies tended to underperform the market as was the case in the US.  House builders surrendered millions after June. They have recovered but many still remain below the Plimsoll line. On the domestic front.  Tesco and Wm Morrison really started to get their act together and come out fighting against Lidl and Aldi – Tesco +37% on the year and Morrison +51%.  NEXT and M&S performed below par on the high street – down 31% and 23% respectively. The cost of fuel contributed to the fall in value of EasyJet (-33%) and IAG (26%).  Utilities also had a poor year with Capita doing particularly poorly. Though the level of M&A activity fell last year, the UK was involved in substantial deals. ARM sadly headed east to Softbank for £24 billion.  Shire purchased Baxalta in a $32 billion deal and AB InBev bought SAB Miller for £68 billion. BAT may still conclude the purchase of shares in Reynolds American that it does not already own for $47 billion. Ladbrokes and Corals finally merged for the benefit of the bookmaking industry.


The biggest deal/news of the year was Donald J Trump winning the Presidential election against all the odds including the press and TV – some feat – love him or hate him! The fact that he may well get his $1 trillion infrastructure spending through Congress plus corporation tax cuts from 35% to 15% over the next 2 years certainly made the US stock market very horny, with the DOW and S&P breaking new record grounds.  The NASDAQ still has a little way to go. Markets are starting to look a little rich – so they will need evidence after 20th January that President Trump intends to crack on.  Otherwise there may be congestion, resulting in markets taking some well-earned profits. Clearly, with the prospect of maybe 3 interest rate hikes in the offing, banks were an attractive sector to be owning.


 UK companies posting interim results this week – Wednesday – NEXT, Friday – Topps Tiles


US companies posting interim results – Wednesday – FORD (Sales) – Thursday – Costco, Fred’s (Sales), Walgreen Boots Alliance. Monsanto, Constellation Brands, L-Brands, GAP (sales)


Economic data posted this week – Friday – Non-Farm Payrolls and employment data  



David Buik


Market Commentator – Panmure Gordon & co
+44 (0)20 7886 2775

Mobile – 0044 7788 144 877

Panmure Gordon & Co

One New Change | London | EC4M 9AF


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