Beaufort Analysis No.242 – “They will be met with the fire and the fury like the world has never seen”

Last week marked the 10th anniversary of the Great Financial Crisis (GFC). 10 years on, banks are better capitalised, and, arguably, better regulated. Whilst the global financial system feels like it’s on better footing, there is still an unprecedented level of global debt. Over the last decade, the imbalance of debt in the system has changed; moving from private debt to public debt but more recently, in the UK, we have seen a return to concerns over private debt. Car financing loans have increasingly featured in the broadsheets over the last few months. In 2016, more than 4 out of 5 car financing deals were made via PCP loans. The Bank of England has told banks, credit card companies and car loan providers that they will be subject to fresh action against reckless lending in their toughest warning since the GFC. Looking back to 2008, HSBC warned about a sharp rise in mortgage defaults in the US leading up to the GFC. The difference between now and then, is that we are acutely aware of what the outcome would be if corrective action is not taken. Despite these concerns and in what has been one of the most unloved bull markets, which typically last seven years, the S&P 500 has risen over 230%, the FTSE Asia Pacific excl. Japan over 145%, the MSCI Emerging Markets over 103% and the FTSE All-Share over 80%.

North Korea continues to forge ahead with it’s nuclear ambitions and evidenced their ability to produce a nuclear warhead small enough to fit in to a ballistic missile; the technology was thought to be years away. Trump responded that any threats would be met with “fire and fury like the world has never seen”. This reckless statement prompted a response from Pyongyang, who stated that it would consider a missile strike on the US Pacific territory of Guam, where thousands of US army troops are based. North Korea continue to build their nuclear arsenal, which experts estimate include up to 60 weapons of mass destruction. The UN announced a major round of sanctions on North Korea following the ballistic missile tests in July; the sanctions will target key exports.

Firm information on how the UK will exit the EU has not been very forthcoming. Theresa May’s government intends to issue three discussion papers ahead of the next round of negotiations, due to be held on 28th August.

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