We can but hope

After eight positive days, markets paused for breath yesterday. Europe took a deeper breath than the US as the FTSE 100 lost 1% and continues to struggle to push on. Many defensive blue-chip UK equities remain unloved or under a cloud. Income is plenty in the FTSE 100, but capital growth is hard to come by. As strategists fret over the high valuations put on US stocks, few want to dance with the UK-leading index, which optically at least looks far better value. The pound continues to rally now back over 1.3 to the dollar. Although, calm appears to have returned as we await what will happen when the Fed meeting next month, September, rather like August, can be traditionally not a good month for stocks. Seven of the last ten years have seen US stocks fall in September, but on the plus side, that often sets up the Santa rally. The markets are now pricing 75 basis points of cuts by the Fed before the year’s end; I think that would mean 25 basis points at every meeting till the year’s end unless they go for 50 at one meeting, as some speculate in September. We may get more information from Mr Powell on Friday.

Just one thing to finish: we are all aware of the news of the tragic events off the coast of Sicily, which puts the ebbs and flows of capital markets into context. As the search continues for Mr Lynch and other members of his family and friends, we can only hope for a miracle. Mr Lynch, described by many papers as the “British Bill Gates”, founded Autonomy in 1996, becoming one of the largest enterprise software firms in the world, eventually bought by Hewlett Packard for about 11 billion dollars. The firm was a pioneer of business data analysis, using machine learning and what Mr Lynch called “adaptive pattern recognition”.  After the sale, Mr Lynch spent 13 years defending himself against the charge of fraud in what must have felt like an eternity, including spending months under house arrest. Against the greatest of odds fighting the American judicial system, he was finally acquitted of the accusation this June. Most recently, he was advising the government on the opportunities and risks of AI.

In his first interview after being cleared, he told The Times newspaper: “I’d had to say goodbye to everything and everyone because I didn’t know if I’d ever be coming back.”  The trip was supposed to be a celebration of his acquittal. This is a sad and tragic story. We can only hope that this is not goodbye and that he can find a way back, defying the odds once again, along with his daughter and friends.