After the unprecedented wrath delivered by Hurricane, and then Tropical Storm, Harvey, the media and state governments were laser-focused on the potential for Hurricane Irma’s destruction on Florida and the South East. The most powerful Atlantic hurricane in decades did wreak havoc as expected in the Caribbean, ripping out infrastructure and basic services of many locations that have become off-shore service centers (such as BVI). International accounting and legal firms have evacuated most of their staff as the areas have become uninhabitable for now, and exposed to the dangers of looting and other lawlessness.
North Korea was more subdued over this tumultuous weekend, refraining from launching any more test missiles, and thus assuaging markets that had been primed to watch their every move. The unanimous vote of the UN Security Council to impose tough new sanctions on North Korea (but stopping short of an oil embargo) also shored up confidence in there being a concerted international reaction to the provocations. Markets reacted accordingly, rallying into the beginning of the week, as the Dow touched 22000 again and the S&P hit a record high on Monday September 11. Safe haven assets corrected (the 10-year had its largest one day yield rise in a month), as investors seemed to take comfort in the belief that central banks would work to control damage by one-off risks such has hurricanes and geo-political tensions.
Meanwhile the hacking of credit bureau Equifax was an ongoing reminder of the danger of cyber-threats, and and the fact that certain executives seem to have sold their stocks in advance of the public announcement of the breach, looks like an intriguing insider trading lawsuit waiting to happen.
Rumblings of negative inflation data emerging from Northern Europe as well as an increase in down-market protection purchases by US investors, suggests that investors are cautious about the current market strength – perhaps scarred by the recent sell-offs and safe-haven chasing. Forewarned is forearmed perhaps. September brings us closer to the inevitable halting of asset purchases by the US Fed, as a first step in their quantitative easing pull-back. This is likely to lead to enhanced volatility in markets, so we will watch carefully as it evolves.