Boris to Win 43 Seat Majority Says Meta-Poll

You’ve heard of meta-analyses, where academics who can’t be bothered to do their own research just nick everyone else’s hard work, crunch the numbers a bit, and come out with a super-accurate result? Well here is our META-POLL. After much reading of the papers, surfing the net, and even talking to people, we have concluded that the Tory party will win. (Bet you saw that coming eh?)

Why do we think that?

  1. Farage folded, as predicted here recently, avoided splitting the leave vote, and crowned the Tories as winners

  2. The Labour manifesto was written to appeal to hard-line left wingers – who would have voted for Jeremy anyway. Only the naïve or those too young to remember the 1970s could think that nationalisation is the answer. (See our earlier report on rail user numbers pre- and post – nationalisation). The “free” broadband idea went down well, but the practicalities are horrible. By the time it is built, at five times the original cost, technology will have made it obsolete. And the big beneficiaries will be the farmers and isolated rural communities – who will not be voting Labour under any circumstances. Meanwhile, their fence-sitting on Brexit feels a bit like “Follow Me….. I don’t know where we are going, but Follow Me!”

  3. The Liberal Democrats have shown themselves to be neither liberal nor democratic. Their reverse Article 50 campaign can only appeal to the most die-hard europhiles. Meanwhile, Jo Swinson has not done well. Her claims to be PM in waiting invite the retort that she’ll be waiting a very long time.

  4. The Tories have avoided a May-style manifesto-suicide-note. Divisive figures such as Rees-Mogg have been kept out of the limelight. Boris himself has picked his battles carefully, with more to lose than win.

So what happens now?

There are still considerable risks for Mr Johnson. Will the left-leaning students be too busy recovering from their end-of-term parties to vote?

Students preparing to oversleep and miss voting

Just how many people were too embarrassed to tell pollsters that they would vote Tory (but will anyway)? Will tactical voting have any impact? Will Mr Trump try to intervene? He is not great at keeping his thoughts to himself is he? That could hurt Boris. In this last week, we expect the Tories to try to refocus on Brexit as the major issue – and Labour to try to talk about virtually anything else!

What does it all mean for Asset Prices?

The market had a lost year in 2019, with too much uncertainty. A Tory win is about 70% baked into the market, so we expect a moderate bounce on 13 December. This will be most pronounced for the likes of BT and other nationalisation victims. Despite longer term trading arrangements still being in the air, we feel that 2020 will turn into a log bull run for equities and commercial property, as investors get back to the serious business of making money.

FTSE Forecast for January is…….. LOWER!

We’ve been forecasting FTSE100 with a six month timeframe for six months. Which means, oo-er, that we have just reached the outcome of our first prognostication.

Stock Prices green for up, but we think down

The best traditions of economic forecasting is to make the call, try to write some eye-catching blurb – and then MOVE ON, and never re-visit. After all, what is to be gained by checking on whether the forecasts were correct? Sooner or later, the call will be just ridiculously incorrect, which will make the author look stupid. And at other times, it will be spot on, so the writer then starts making hubristic comments about their skill (even though everyone knows it was only luck), and so still looks stupid.

However, one of our many maxims is “You can’t tell stupid”.

FTSE over the last year, with date of forecast shown

And so here goes with our review of January 2019’s forecast. At the time, FTSE was in the doldrums, having fallen for six months. When we made our forecast, it was 6855. We foresaw a reversal, and a strong climb to 8050. Well, we got the change of direction correct. Last night it closed at 7532. So it didn’t climb quite as far as we expected. Blame Brexit for that. The whole world seems to be using Brexit as the catch-all excuse for any under performance, so there is no reason LondonMarketComment can’t do the same! We thought that one way or another, it would be resolved by now and we could all get on with the more interesting parts of our lives. Anyway, we award ourselves 7 out of ten for that call.

The New Forecast.

We’ve been saying for a couple of months that we saw FTSE100 up to 7500 in July, and then a fall to 7200 by November. We got the 7500 right. We now say that the 7200 of November continues into January.

Why do we say this? Right now, the stockmarket has it’s positive head on. Bad Non-Farm Payrolls for May were taken positively. We understand the logic of a weak economy making interest rate rises less likely….. but, er, doesn’t that same weak economy make it harder for companies to make money? Subsequently, the June NFP came in much stronger – but that didn’t dent market sentiment either. So the market is a bit blinkered.

Meanwhile, we can all see risks to the global economy. Nobody knows where the US/China tariffs-that-are-really-strategic-politics will end. Trump and Xi Jinping both need to win this battle of wills. Meanwhile, Europe is catching a cold from Chinese hesitancy. The middle east could blow up (though we don’t foresee that). Oh, and last – and probably least – there is Brexit.

In conclusion, the market is in happy mode, but there are plenty of potential threats over the next six months. A downside surprise feels likely. So we see FTSE struggling to go higher, with a dip due by year end and no climb in January. Doom doom doom!

Tesla Should Buy Honda’s Swindon Plant

Honda Civic

It is heartbreaking that Honda has decided to close its Swindon factory.  Honda have a remarkable history of being totally apolitical, so we believe their remarks that the decision was not provoked by Brexit.  And logic says that nobody would make such a large decision when we are only a few weeks away from knowing how the tariffs will stack up in the future.  In many ways, Trump’s threats of 25% charges on European built cars (which includes us for now) would do more damage to Honda.

 

The sad truth is that Honda’s Swindon operation was too small!  As Jim Holder of What Car https://www.whatcar.com/  noted, Honda only has a 1% market share in Europe, compared to 8% in North America and Asia.

 

Honda also needs to invest in electrification.  A subscale factory with subscale supply lines, half way around the world, doesn’t make sense.  Why not crank up a home – factory from 2 million to 2.2 million and ship the cars?  The very recent zero tariff trade agreement between Japan and EU will have been a larger factor than Brexit.

 

So that all leaves a modern factory, a highly trained workforce and existing supply lines all in place.  Which manufacturers are expanding, capacity constrained, and potentially keen to get around EU tit-for-tat tariffs on cars.???

TESLA!!!!

Tesla Model S

The value in electric cars is in the batteries, motors and control systems, so ship them in from California, and produce the rest of the car in the UK!  For a smaller scale producer (think 1 million total not 5 million total), a smaller factory would be ideally sized for the European market.

 

Greg Clarke

Come on Theresa May and Business Minister Greg Clarke, time to arrange a meeting with Elon Musk and get on that plane to California! At least the weather should be better than Brussels.

FTSE100 Still Going Higher Despite Brexit Chaos

It is time for another 6 month forecast for FTSE100. We continue to see a much stronger stock market in London.

In January, when shares were at 6855, we stuck our necks out (a very long way given present uncertainty) and forecast FTSE at 8050 by 15 July.

See http://londonmarketcomment.co.uk/uk-equities/uk-equities-ftse100-up-to-8050-in-6-months/

As of last night, the index was at 7129. So I guess that is so far so good – though it is way too soon to start crowing about our success. Who do you think I am, Donald J Trump? He rather unwisely took the credit last spring when the Dow was flying. He’s been untypically silent on the subject since it retraced!

Over the month since our last forecast, well pretty much nothing has changed. Brexit is still the same. Unsurprisingly, UK growth was slightly softer in December. The US economy had good employment numbers, the EU economy was totally flat, who knows about China? Inflation was falling in general.

So we still see small upticks as Brexit nears the Fig-Leaf-Deal that we continue to expect. It was pleasing that Andrea Leadsom on Radio 4 described such an outcome today – though she didn’t give it our slightly derogative name.

Once the Brexit risk is settled, we see a relief rally in the late spring – and then sideways over the summer. Thus our forecast for August is the same as we called for on 15 July.

We see FTSE on 15 August at 8050.

It’s not very headline-worthy saying that we think the same as we did last month is it? Oh well, if you want excitement, I suggest that instead of market-watching, you take up kite-surfing instead.

UK Economy to Trump Brexit

Did you miss it hidden in all the Brexit doom and gloom? The economy is doing just great!

The media and Westminster are hysterically screaming and shrieking every day about the Brexit car-crash cum train-wreck cum disaster-movie where we might crash-out-of-Europe over a cliff-edge in some kind of national Thelma and Louise climax. (I wonder if they actually see a map of UK in a 1966 T’bird driving over Beachy Head?)

And of course you wouldn’t catch us at London Market Comment devoting days of our busy exciting lives commenting on such distractions would you???

Meanwhile, the UK economy is ticking along pretty nicely. Office of National Statistics figures released yesterday at www.ons.gov.uk/ confirm unemployment at its lowest for more than 40 years, with the employment percentage at its highest ever since data was first collected in 1971. That is, the best for nearly 50 years.

Earnings are up by 3.4% since last year – and all the time inflation is down to 2.1%. Folks are getting increased spending power – a better standard of living!  This is what is happening out there in the real world, not to the self-absorbed London Commentators! (Ooops, that’s us too).

CELEBRATE EVERYONE!!!!

What does it mean? In the real world, people are going about their business, buying, selling and investing – and completely ignoring all the Casandras alarmistly (like my new word?) predicting that something terrible is about to happen.

Maybe, just maybe, the wisdom of the crowd is that the Brexit story is being ever so slightly overplayed???  So ignore all the prophets of doom out there.  I checked to see if this amazing good economic news made the front pages of the national newspapers – and it didn’t get a mention. Don’t worry, I looked on the newstands rather than buying all the national newspapers.  But regardless of the lack of coverage, it is true!

 

LET’S ALL LOOK FORWARD TO A POSITIVE, SUCCESSFUL AND PROSPEROUS 2019

 

PS. See what I did with the title to attract Google hits?? Using words such as Economy, Trump and Brexit must attract all the search-bot, surely? I’ll let you know if it works, or if Google is too clever to fall for my cunning little plan.