Yet another month was dominated by political noise, with UK elections nearing and US-China trade war pushing forward
Election noise builds in the UK and US: the markets in November
We have seen both Labour and the Conservatives come under scrutiny from professional body IFS on parts of their manifestos, making this election seeming to be a decision between which candidates are the least hated. It’s clear Brexit is still the standout factor in this election. With 3 and a half years of prolonged talks, both the British public and the economy want to put this confusing saga behind them and return clarity to the UK which should help drive investment back into the economy.
However, some parties argue that the deal agreed is worse than Theresa May’s original agreement and would rather put it back to a second referendum on the matter. All in all, the political and economic landscape remained cloudy in November. The market did rise roughly 1% though, suggesting markets do believe a Conservative majority is on the horizon and Brexit will come to an end.
The US S&P500 has had its best month since the early summer, growing by roughly 3.4%. Equally, the NASDAQ and the Dow Jones also made their largest gains since June, growing by roughly 4.5% and 3.7% respectively. Rising optimism surrounding the US-China trade war are helping push indexes to record highs. Despite the overwhelming uncertainty at the start of the year, robust economic fundamentals such as record low unemployment and strong consumer spending has helped prop up the economy. With the 2020 presidential election around the corner, some investors are likely to be mildly confident that this spurt will continue.
Mergers & Acquisitions
November has been a fairly busy month in terms of M&A activity with companies taking advantage of the supportive monetary environment. IAG completed the takeover of Air Europa for €1bn in a bid to establish the group as a leader in the attractive Europe to Latin America and Caribbean market. The move appears to be a good strategic fit and should hopefully add to the group’s impressive track record of acquisitions.
Moving to American broking market, Charles Schwab agreed to acquire TD Ameritrade in a deal valued at $26bn. The deal will now see Charles Schwab oversee $5 trillion in assets, providing the group with even more prominence within the sector. Following Schwab’s elimination of trading commissions, other brokers were forced to follow cutting crucial revenue streams. Schwab’s reliance on these revenues is smaller compared to Ameritrade’s and is therefore likely to be a leading factor in the takeover. In an industry that’s focusing heavily on costs, it is likely more company get-togethers lay in store.
Towards the latter end of November, the luxury consumer goods giant LVMH agreed to take-over US jeweller Tiffany with a view to transform its own watches and jewellery division alongside boosting its position in the US market. This deal represents LVMH’s biggest deal since Bernard Arnault, the chairman, took reign and seems to be a solid strategic move in a market with favourable fundamentals and the ability to complement LVMH’s existing Italian jeweller Bulgari.
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