In the City, they’re already talking of it as a “nine-month year”. There’s so much uncertainty coming in the last quarter of 2024 that they’re getting their business done early, battening down the hatches from September onwards.
Both the biggest financial markets will be in the grip of political upheaval. In the UK, if Rishi Sunak has not called an early general election we will be heading towards one, most likely in November.
It’s possible he will go soon, in May, to seek the national vote first, before the local elections and a probable bloodbath for the Tories. June could well see Sunak immersed in negativity, fighting to explain the locals catastrophe and save his leadership. July is the summer and the onset of annual holidays. Then it’s autumn, and almost certainly a date after the completion of the party conference season.
Even if Sunak opted for May, it would still be towards the end of the year when the ramifications were becoming apparent, that, if the polls are correct, a new, Labour government would be bedding in – with all the turmoil, after 14 years of Tory rule, that will bring.
Meanwhile, in the US it looks as though President Joe Biden and Donald Trump will go head to head again, a rematch of their contest that ended in near civil insurrection. There, the stakes could not be higher – increasing the probability of a national schism in the event of another anticipated close battle.
Add to the mix ballots occurring elsewhere in the world, a continuing war in Ukraine (there seems little prospect of that ending in the near future), and trauma in Gaza and the anniversary of the Hamas attack on Israel, and the stage is set fair for a turbulent post-summer.
Ukraine strikes drone factory deep inside Russian territory
Rather than face volatility which makes decision-making nigh on impossible, companies and their banking advisers have chosen to move now.
They’re bringing forward their fund-raising, not wishing to wait until later in the year when they would otherwise have gone. The result is a stampede of bond issues, worth $606 billion, a two-fifths increase on the same period last year, according to LSEG data. It also marks the highest tally since 1990.
The lowest spreads in a long time, marking the difference between US corporate debt yields and the yields on government bonds, have also influenced their thinking.
The Viv index, regarded as an indicator of fear as it collates expectations of swings in the S&P 500, is also suggesting an autumn roller-coaster.
Companies are issuing debt against a backdrop of greater economic health. It may seem contradictory to say they are going now to avoid uncertainty later, so the political landscape is queasy, yet the economic one is the most solid it’s been for a while.
Countries are, finally, showing signs of getting to grips with inflation, the cost of living is no longer the issue it was, those who struggled to extricate themselves from the coronavirus are on the up.
Car manufacturers are borrowing, hinting that they see an upswing in consumer demand. Construction firms, likewise, are preparing for an upturn. A green flag, surely, is that banks, usually the most cautious of players, have also clamoured to issue debt.
They want their ducks in a row, come what may.
For many it’s a case of raking in the money today, and hanging on to it, so it’s there for use in time of trouble but also available should there be a lift.
The surge in activity is not just confined to bonds. IPOs are back on the immediate agenda, with two, Mr Trump’s own social media site and online social forum Reddìt, paving the way.
It’s not so much devil may care, but after weighing up all the options, it’s companies taking the view they have nothing to lose.
Borrowing using convertible bonds – that can be switched for shares if the issuer’s share price rises to a pre-agreed level – is also booming. Issues of convertibles have soared by more than half already this year to $17 billion.
Over the years, things usually settle down, elections will occur and governments replaced. What’s troubling this year is the Trump factor. There has been dark, opaque talk of “revenge” from his camp, there’s the persistent feeling that he has unfinished business, that if you thought his first term was a constant whirlwind you haven’t seen anything – his second “legacy” term could be more controversial. Truly wild in other words.
That’s less likely to be the case in the UK. Labour is going out of its way to suggest it has no money, that its room for manoeuvre will be tight.
While the US braces itself in the event of a Trump victory for disruption (or even if Biden wins and Trump refuses to accept the result), in the UK our ride may not be so bumpy.
“Sell in May and go away” is the City traders’ adage. It’s based on the principle that stocks rise more in the six months from November to April than from May to October. It used to be that traders liquidated their equity portfolios on May 1, switching into cash, then buying back those stocks after Halloween.
This year of all years, no one would blame them if they were tempted to stay away that bit longer.
