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So much for Brexit staying out of the news after the postponing of the vote. To be fair the last 24 hours has been more about the survival of Theresa May, what does not kill you can make you stronger, comes to mind. The EU must have been as nervous for the outcome yesterday as Theresa May herself. If the confidence vote had gone against her, the Brexit deal she had negotiated would have in all likelihood been consigned to the bin. That would have left two options, one apparently revoking of Article 50, hard to imagine, the other more likely the inevitable of hard Brexit. Either of those outcomes was not particularly palatable.

The S&P 500 bounced off 2600 for the third time in succession, this appeared to offer comfort to traders to chase equities at the start of Tuesday. This will once again raise the question if this is the start of the Santa Rally? Brexit is likely to come off the headlines, at least for a few days, as the vote has now been postponed. There can be no doubt Brexit fears have affected sentiment towards the global economy. The equity market seemed happy to ignore the various topics that have haunted investors for the past couple of months, at least for a day. One piece of news that helped support investor sentiment on Tuesday was the news that China had reduced the tariff on imported cars from the US from 40% to 15%.

Go figure stocks markets, for the past few years, investors have been sceptical as there has been little sign of earnings growth, modest economic growth. In the face of this scepticism equity markets have been rising. Valuations we were told were unsustainably high. Equity markets were just being propped up by cheap money. Now we get the conditions that are supposed to favour equity markets. Company earnings have grown this year, valuations are now closer to being in line with historic norms, the global economy is growing, yet equities are unloved. December has been traditionally the best month of the year for equity investors. In contrast, his has been the worst start to December since this month 2008 when equity markets fell 5%.


 

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