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STANHOPE CAPITAL FORTNIGHTLY BULLETIN

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STANHOPE CAPITAL FORTNIGHTLY BULLETIN

Period ending 31 August 2017

Tactical Positioning 

We have not made any changes in portfolios over the last two weeks, preferring to believe that good macro and micro data will be more than enough to offset the geopolitical worries that have recently emerged. The US administration is still expected to produce a tax reform package before year-end and this has also helped to underpin risk assets. Currencies continue to grab the headlines with the US dollar having dropped 13% against the euro since the start of the year. If these lower levels are maintained, US exporters could be in for an unexpected boost.

Market Moves

US Treasury

Equity markets were again driven by the ebb and flow of geopolitical events over the last two weeks. In the last few days, tensions over North Korea have escalated further, as another ballistic missile, this time flying over the Japanese island of Hokkaido, has sent jitters through global markets. In response, safe haven investments have benefitted, with government bond yields falling during the month and gold hitting a nine-month high of $1,325. Gasoline futures also surged above $2 per gallon as the outlook for US supply was hit by tropical storm, Harvey.

In the third week of August, the VIX index (which reflects the expected volatility of US equities) rose by over 30% on two days in one week (only the third time this has happened), fanned by North Korean rhetoric. Spikes of this magnitude are rare, but they have occurred three times so far in 2017, perhaps reflecting the relatively low level of the index.  The index typically hits its lowest point each year around mid-July before starting to rise in August and we seem to be following the same pattern this year. Investing in volatility has grown in popularity with the volume of transactions in volatility index exchange traded funds climbing to 14% of the total volume on the New York Stock Exchange on 17th August (a record high).

In the US, Amazon completed its $13.7bn acquisition of food retail group Whole Foods Market, announcing a cut in prices on a range of popular goods by a third and sending the S&P 500 food index down 5%. Reuters described the cuts as ‘surgical’ rather than broad ranging saying that Amazon would have to cut overall prices by 10-15% to match the prices of the major chains.

Economic Update

The US faces two serious challenges when Congress returns from recess on 5th September. First, passing the budget to avoid a government shutdown, which Trump has said would need to include a commitment to paying for a Mexican border wall, and second, raising the debt ceiling above the current watermark of $19.8trn, absent of which, the US government will start having to cut expenditure later in September. Markets have remained calm amidst the debt ceiling concerns which suggests a level of confidence that the ceiling will be raised; passing the budget looks to be a trickier hurdle to overcome. Meanwhile, investors were disappointed to get little guidance on future monetary policy from the speeches by Janet Yellen and Mario Draghi at last week’s Jackson Hole Symposium.

The Philadelphia Federal Reserve business survey of planned capital expenditure over the next six months has increased significantly since last year. In July, the survey reached its highest level since 1984, which suggests that US economic growth should remain well supported by business investment in the coming months. The continuing fall in the unemployment rate is boosting US consumer confidence, with retail sales growing by 4.2% year-on-year. The US Manufacturing Purchasing Managers Index (PMI) of business confidence was lower than expected at 52.5 vs the expected 53.5 (although still above the expansionary 50 level) whilst the Services PMI increased to 56.9 vs the expected 55.0, the highest level since April 2015.

PMI manufacturing numbers in the Eurozone continue to show robust growth, with Germany surprising analysts by moving back up to 59.4 and the Eurozone Composite coming in at 55.7. This suggests that the current rate of economic growth should be sustainable into the latter half of this year. In the second quarter, Eurozone GDP increased by 2.2% year on year, the fastest pace since 2011. The persistence of healthy economic growth should allow European corporate profits to continue to grow, despite the appreciating euro.

In France, President Emmanuel Macron unveiled plans to overhaul the rigid labour laws in an attempt to become more business friendly and drive down unemployment, currently at 9.5%. The measures include a cap on pay-outs for dismissals, greater freedoms to ‘hire & fire’ and more flexibility to adapt pay and working hours to market conditions. This has been attempted by numerous French governments from the left and right, all of which have largely failed due to union opposition. There are already planned union protests in the coming weeks so it will be interesting to watch how this develops.

Elsewhere, in China the largest state-owned commercial banks continue to raise billions to fund investment under the ‘belt and road’ initiative, with the China Construction Bank raising CNY 100bn ($15bn) from onshore and offshore investors. The fund-raising follows government plans to improve regulation of domestic firms investing abroad and calls for financial institutions to develop overseas lending business, further developing the “new silk road” and tying economies to China.

Concerns about the Russian banking sector have been increasing over the last few weeks fuelled by the Central Bank of Russia revoking licences of 36 banks and bailing out Otkrite bank, Russia’s largest private lender and seventh largest bank by assets.

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U.S. inauguration turns poet Amanda Gorman into best seller

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U.S. inauguration turns poet Amanda Gorman into best seller 1

WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.

Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.

“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.

Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.

While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.

“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”

Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.

“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.

“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”

The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.

“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.

A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.

She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.

Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.

“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.

Gorman’s books are both due out in September.

Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.

(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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Why brands harnessing the power of digital are winning in this evolving business landscape

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Why brands harnessing the power of digital are winning in this evolving business landscape 2

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

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Brexit responsible for food supply problems in Northern Ireland, Ireland says

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Brexit responsible for food supply problems in Northern Ireland, Ireland says 3

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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