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Cambridge Weekly – 1st September 2020


1st September 2020


General News

Big tech gets bigger while the Fed takes the easy option

In a week where Donald Trump kicked off his re-election campaign in earnest, global investors showed it is indeed “America first”. US equities continue to push at all-time highs, having recovered everything lost in March’s frantic sell-off – and then some. If the stock market soaring to new heights while the world languishes in its deepest ever recession isn’t staggering enough, we also note the US is accelerating away from its global peers. While the S&P 500 has gained an incredible 56% from its March lows, the UK’s FTSE 100 has barely moved in the last few months – seemingly locked around the 6000 level. European and most other markets look similar, with US and global investors all giving the world’s largest economy an overwhelming vote of confidence.


Apple stock split has domino effect on indices and trackers

Yesterday (31 August), Apple split its shares four to one, meaning holders of Apple stock will have four shares trading at a price of $125 instead of one share at the current price of $500. This is Apple’s fifth stock split, aimed at making the stock more accessible to new investors (it is possible to buy less than one share of some companies, but not easy).

A ‘book-entry’ change should not affect investor views of the total valuation of a company. After all, the holding of existing investors is not diluted – at the moment the split happens the company’s market capitalisation is unchanged. But history shows that it can, at least temporarily. This seems to have been so for Apple last week.


US bankruptcies: expected but not altogether undesirable

As we have written many times, the deepest global recession in the post-war period is no ordinary one. With activity suppressed by government diktat, it is hard to gauge how much of the plummet in demand is ‘real’ and how much is just a – hopefully short-term – virus response. To judge where the forced recession ends and the ‘classical’ recession begins, we need to pay close attention to the hallmark of all economic downturns: bankruptcy.


Read the full commentary here