“Keep your eye on your horizon and a smile on your face” The Seekers

A better week for stocks after three weeks of declines, the Vix index falling below its long-term average, suggesting that despite much to concern themselves with, investors are unwilling to pay up to insure portfolios. Confidence or complacency is hard to tell, and cases could be made for both. The Telegraph drew attention to a topic highlighting the number of companies upping sticks from the UK for a listing in America.

The phrase would the last person to leave the country please turn out the lights was the headline of one tabloid, which put pay to the Kinnock challenge for the Prime minister. Under a Tory government, it is remarkable that the same feeling comes to mind as many blue-chip UK companies look to move their listing across the pond. In the past weeks, Arm holdings, CRH, and Flutter owners of Betfair have all said they will move their listing to America, and even Shell is considering the same move. The Telegraph has a list of other companies considering following suit. The main argument for a US listing has been the valuation uplift one automatically gets for a listing in the US. That has always been the case; why are so many companies considering this move now? The regulatory environment has become one which is not friendly to place more to list shares. As well as this, pension funds have been reducing their holding in equities by 90% in the past 20 years. A crazy decision that has come back to haunt pension fund managers ever since. Another example of how regulation and taxation are becoming so onerous in this country that it is restrictive to business.

We have been focussing recently on the relative valuations of stocks and bonds, particularly for US stocks.  Even though rates have been rising aggressively, one has to bear in mind that real interest rates remain negative, which remains supportive for risk assets, particularly for European markets. Real interest rates in the UK are circa negative 5%.

Looking to the week ahead, it will be another busy one for investors to digest the Labour Department’s February jobs report and Fed Chair Jerome Powell’s testimony before Congress. Expectations average hourly earnings growth has accelerated to 4.8% will add to concerns over the ongoing inflationary pressure. In the United Kingdom, the ONS will be updating monthly GDP figures, manufacturing production, construction output, and foreign trade data will also be released this week. Elsewhere in Europe, the Eurozone will reveal the final estimate of fourth-quarter GDP and January’s retail sales. Germany will publish final inflation figures for February, industrial output, and retail trade.

In China, the annual session of the National People’s Congress is expected to implement a significant government reshuffle, while policymakers will be announcing official growth targets for 2023. Stocks look as if they will start the week on a modestly positive note.