It’s rarely wise to read too much into financial markets’ snap reaction to a US presidential race, especially when investors are responding before the result is known for certain. Back in 2016, remember, a victory for Trump was meant to be terrible for share prices but the US stock market surged.
But one can point to a few reasons why shares rose on Wednesday. First, a narrow presidential victory for Joe Biden, if the Republicans hang on to critical control of the Senate, is not likely to terrify owners of equities. A gridlocked government would make big increases in corporate taxes less likely. Only a Democratic “blue wave” landslide was seen as capable of delivering fundamental changes on that score.
Second, though a blue wave would also have meant a $3tn (£2.3tn) fiscal spending programme – good for share prices, in principle – a smaller stimulus package should still materialise whoever is in the White House. If it doesn’t, it would fall to the US Federal Reserve to fill in the gaps. Investors understand, or at least they think they understand, the key point about the Fed: it is better at supporting shares prices than the economy.
Third, whoever wins the presidency, a gridlocked Congress, which is still not certain, is seen by many investors as a safe outcome. It would lessen the risks from Trump’s trade wars, and tie the hands of Biden on the economic reform. Investors are betting, in effect, on little real change. Big Tech, with potentially most to lose from a Democrat landslide, loved it. The tech-heavy Nasdaq index rose 5%.
To repeat, the market’s initial judgment may turn out to be spectacularly wrong. One suspects it might be. A gridlocked government and addiction to the Fed sounds long-term risky.
Behind M&S’s first loss lie years of unresolved problems
The cheerful view of Marks & Spencer’s first loss in 94 years as a public company is that the figure of £87.6m was not as bad as many had feared.
It was also accompanied by minor consolations. The timing of the launch of the online food partnership with Ocado, a deal negotiated before Covid, turned out to be inspired, or lucky. And lockdown 2 shouldn’t be as painful for M&S as the original. A few logistical tricks have been learned, management promises, and the business is not as overloaded with excess stock.
Fine, but as ever with M&S, the results statement was also peppered with reminders of how many problems have been unaddressed over the years. The latest self-help programme is called MS2. It’s a bid to make the online clothing and home operation behave more like a standalone, as opposed to “the online channel of a stores retail business”.
The ambition is sensible. Online has different patterns of demand and there’s more scope to experiment with ranges. And, since M&S thinks it is now awash with customer data after the revamp of its Sparks loyalty card, there’s an opportunity to be cuter with marketing.
Others, though, have been working that way for years. M&S aims to generate 40% of its clothing and home sales from online within three years from 23% pre-Covid, but Next has already passed 50%.
M&S, it is still possible to believe, will be transformed eventually. A strong balance sheet, which the company still has, buys time. The Steve Rowe-Archie Norman double-act at the top has injected a greater sense of determination. But, even as M&S says the pandemic has accelerated the pace of change, there is always the sense that the list of things to improve remains long.
Job losses suggest John Lewis’ partnership could be slicker
On another bad day for job losses, the John Lewis Partnership’s plan to cut 1,500 roles at head office stood out. That’s a very large number to be removed solely from central operations. As a percentage, it’s almost a third.
It does rather suggest that the department stores and the Waitrose supermarkets have not been working as a true partnership. Instead, they’ve been duplicating costs and roles, which is roughly what Sir Charlie Mayfield said before he departed as chairman. Sharon White, his successor, is merely sharing his analysis that £100m can be saved from head office costs.
Making the two halves of the organisation sing in harmony, however, will not be straightforward. Some internal empires will have to be dismantled, which may test the partnership spirit.
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