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23/03/2017

Weekly News Bites: Bringing down the house

Our top picks from this week's Morning Chat

Bringing down the house: The typical property in the UK costs 7.6 times average annual earnings, a record multiple. Unsurprisingly, London hosts seven of the 10 least affordable areas: the typical property in Kensington and Chelsea is worth 38 times the average annual income of area residents. Indeed, across London, the average property now costs about 13 times earnings, up from 7 times in 2002. Give or take, this equates to an average price of £500,000 compared to average income somewhere in the mid-£30,000s. (20/03)

Bitter pill: Latest polls show US President Trump's approval rating at 37%, lower than either Barack Obama or George W. Bush ever hit. This matters because Mr. Trump is going to need every ounce of political capital to "repeal and replace" Obamacare in the House of Representatives today. Republicans can afford only 21 defections; not a single Democrat is expected to defect. If this bill cannot be passed, markets will reassess expectations for vast tax cuts and spending promises that have fuelled global stock markets to all-time records. (23/03)

Bouncing off the walls: Sixty-one days into the new US administration, there is still little detail on the revolutionary tax cuts or spending meant to “double” growth. Judging by the roll-outs thus far of policies on immigration (i.e. mired in courts) and healthcare (i.e. 24 million less insured, but relatively little saved), markets have begun questioning the coming stimulus. Ironically, while volatility jumped and global risk assets sold off overnight, Mexican equities hit a new intra-day record. They are up 7% this year – the peso is up 7% too – as investors appear less fearful of walls, or who will pay for them. (22/03)

A fine kettle of fish: Annual headline inflation in the UK surged from 1.8% to 2.3%, rising well above the Bank of England’s 2% inflation target. While volatile items such as food and energy were the biggest contributors – fish, for example, is up 6% – core inflation also jumped from 1.6% to 2.0%. Given nominal wage growth has slowed to 2.3%, the real increase in spending power that has fuelled post-referendum “resilience” has been neutralised. Moreover, inflation is set to rise further, pushing real wage growth well into negative territory… just in time for Brexit negotiations. (22/03)

Prime number: There are about 200 more billionaires in 2017 than in 2016, taking the total 2,043. In aggregate, this group’s wealth equates to $7.7 trillion, roughly the same value as all of the gold ever mined at today’s price (171,300 tonnes at $1,230/oz). Leading the pack is Microsoft founder Bill Gates, topping the list for the fourth year running with $86 billion. But Jeff Bezos, of Amazon, has plenty of reason to be pleased as well: his wealth surged by $28 billion, more than anyone else in 2016, and about the same value as all the goods and services produced in Bahrain last year. (21/03)

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