In 1995, Oasis and Blur were duking it out at the top of the charts, Barings Bank went bust and Manchester United broke the British transfer record by signing Andrew Cole from Newcastle.
Meanwhile, in Downing Street, a Conservative prime minister faced plotting from MPs seeking to unseat him amid weak polling – plus ça change.
To paraphrase Mark Twain, ‘history doesn’t repeat itself but it can rhyme’, and Morgan Stanley sees echoes today of the market situation 29 years ago, particularly in relation to the scenario facing the US Federal Reserve.
As the investment bank’s Marina Zavolock and the rest of the equity strategy team argue: ‘Like today, this was a period where markets focused on rates, inflation, and related data (such as non-farm payrolls) above anything else; the US and Europe saw soft and ‘softish’ landings; the Fed ended up cutting rates more slowly and to a lesser degree than investors expected around the time of the Fed pivot; and there was an undercurrent of technological innovation.’
They go on to note the Fed’s journey does not have follow a linear pattern – in the 1990s the Fed introduced a rapid series of hikes, followed by a pause, 75 basis points (0.75%) of cuts, another extended pause and then a hike. They also observe that, eerily, the recent pullback in global markets occurred at the same phase of the rally as it did back then.
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If they’re right in their assumption that rates and equities will follow a similar path in 2024 and beyond as they did nearly three decades ago then investors will be pleased (see chart). However, that bull market came to an abrupt halt with the dotcom crash around the turn of the millennium so there will be a hope the similarities don’t stretch that far.
The bid situation around Anglo American (AAL) – with rival BHP (BHP) looking to capture the company – is the reminder of how important a commodity copper is and will be in the coming decades.
Known as Dr Copper because of its ubiquity, the industrial metal also has a big part to play in the energy transition. For a company looking to grow its footprint in copper buying a business has logic as opposed to going through the difficult and costly process of bringing new mines on stream.
We plan to look at copper and the current state of play in the mining sector in depth in an upcoming issue of Shares.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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