Whilst the election of Barack Obama could be viewed as a historical political turning point, from an economic standpoint it is hard to see any short term saviour for the world’s largest economy. News should filter out over the coming months but any concrete action will not be seen until early 2009. November saw the publication of further dire economic data including a move in the US unemployment rate to 6.5%. Perhaps more significantly, in the short term central governments appear to be willing to take increasingly radical action to fend off the impending economic slowdown. In the UK, not only were interest rates cut by a magnitude of 150bps but the chancellor also unveiled plans for £20 billion of tax breaks, desperately seeking to stimulate a moribund consumer.
In Continental Europe, bound perhaps more by the constraining collegiate nature of the interest rate process than by a rosy economic backdrop, the cut was more modest at 50bps following on from the same number in October. Falling oil and metal prices should ensure inflation is now well and truly curbed meaning further cuts should flow more easily.
European stock markets ended the month in negative territory, though only marginally so, thanks to a substantial rally in the final week of the month. The Fund posted a positive return with a mixed bag of outperforming stocks and an aversion to the more dangerous financials and commodity related sectors.
Travel and Leisure
As the cost of fuel remains high and consumers continue to reign in spending, demand for cheaper modes of transport is rising. We expect bus and rail operators to benefit most in this environment as rising fuel costs can be absorbed by an increasing volume of passengers.