24th May 2021
Market resilience in face of Bitcoin crash
Beyond the directly virus-related stories, last week’s news was dominated by cryptocurrency shenanigans and the return of outright war in the Middle East. Cryptos are the “Reality TV” version of markets – hugely fascinating, but not having much to do with reality – and largely purchased by believers and speculators, rather than investors.
Reality of a different sort, the flaring up of hostilities in the Middle East, is immensely sad. The human tragedy is apparent, but is yet to have wider contagion. While we discuss it greatly, its impact on markets is currently small. It does pose some problems for Western governments, particularly for the US administration, hampering its ability to influence other emerging nations throughout the world. China’s influence continues to expand and is further aided by the Middle East problems, especially in Africa where an Islamist surge is creating havoc. Much as the Israel-Palestine problems are awful, the Ethiopia-Eritrea situation is just as, if not more deadly, damaging and urgent.
Europe’s beacon of hope shines light on old problems
After a long quiet spell, Europe is capturing investor interest once again, with the green shoots of a recovery now coming through. After a desperately slow start, vaccination programmes on the continent have stepped up greatly, with ever more jabs set to be delivered in the coming weeks. That, combined with warmer weather and a slowing spread of the virus, is thawing the freeze on economic activity as businesses start to reopen. Indeed, the signs suggest the recovery is already underway – high-frequency data from the Eurozone is showing a sizable uptick in travel, business activity and job postings – even while growth data suggests the Eurozone economy fared better than feared in the early parts of the year. Barring another turn for the worse, it looks like Europe is headed out of its punishing double-dip recession.
Don’t blame it on the property
With a heavy heart – and a heavier bill – Aviva told investors last week that after a tumultuous year for the fund, the firm will shut its main UK Property Fund as well as its two feeder funds on 19th July and return cash to investors “in a fair and orderly manner”. The current liquidity of about 40% of the fund will be returned (equivalent to about 40% of current value) but the rest will dribble back as asset sales are
completed, which may take up to two years.
Like many other investment firms, Aviva suspended trading in its open-ended property fund last March – just as the pandemic began and capital markets were in nosedive. Equity markets have long since recovered, generating impressive returns over the rest of 2020, but the gates never opened on Aviva’s property investments. Now they never will, with the group concerned that maintaining value – while keeping enough liquidity to fulfil redemptions – would be impossible.