Insight

Achoo | Weekly Market Update

29 November, 2024

As this is a weekly note, I am always acutely aware of the issue of interest fatigue by the people who receive it. There are always plenty of things going on in markets but sometimes they are technical and jargon-filled and sometimes they turn out not to matter that much in the long run. I was therefore reading some tips on engagement written this week by a new (successful) writer on Substack (Nate Silver). His advice is the top 2 ways to get someone to read something are (i) have a punchy headline and (ii) make the first paragraph interesting.

So I stole this week’s headline from the great Joachim Klement at Panmure Liberum. He was making the point that if sneezing was an optional activity it would be banned by our various regulatory authorities because of its well documented side effects (which, for the medically curious, I’ve listed in full at the bottom). My more general point is it looks like Elon Musk, Vivek Ramaswamy and Donald Trump are going to to have a proper go at reducing the regulatory burden that businesses and individuals face in the US. This will no doubt generate plenty of headlines in 2025. And if they have some success you might see some market moves in highly regulated sectors like finance and healthcare.

These moves will not always be up: one feature of high levels of regulation is that it tends to benefit incumbents. They are more likely to understand all the regulations and have people and procedures in place to deal with them. And larger firms in particular will have relationships with senior regulators and so be able to limit any nasty surprises. All this makes it harder for new entrants. The stasis in the banking industry (the big UK banks are the same old names as 20 years ago) is partially a result of all the regulation they have to face.

Chamath Palihapitiya (a venture capitalist and a friend of Elon) summarised the current US plans on X (or Twitter if you prefer):

“Their plan focuses on five main areas.

  • First, they aim to remove regulations that Congress never explicitly authorized, using recent Supreme Court decisions as legal backing.
  • Second, they plan to cut the number of federal workers through workforce reductions, bypassing civil service protections by using existing “reduction in force” authorities rather than targeting specific employees.
  • Third, they will stop federal spending that wasn’t authorized by Congress, which they estimate exceeds $500 billion per year.
  • Fourth, they intend to improve cost efficiency in government procurement by conducting large-scale audits of old contracts.
  • Fifth, they plan to address waste at the Department of Defence, which has a budget of more than $800 billion and has failed its seventh consecutive audit.

They plan to make these changes using presidential powers granted under existing legislation rather than trying to pass new laws through Congress, with a goal to complete this overhaul by July 4, 2026.”

Of course, plenty of new governments – and especially those on the right – try and have a go at some form of this when they come to power. I remember Jacob Rees-Mogg saying similar things (without any noticeable effect) in the UK. The difference here is the people trying are all explicitly political outsiders who won’t be bothered too much by what the media says and who feel they have a clear mandate to shake things up.

We will see what they can do in practice, but any success would, I think, bring meaningful upside to the US economy. And, of course, it would provide a concrete example for the rest of the world to follow. It goes without saying that the UK could do with some of this medicine too. Productivity growth (doing more with the same inputs) is the main way we all get richer. I have shown the chart below before but anything that gets productivity growth moving in the public sector would ultimately benefit us all:

So I will be watching developments in the US with real interest. Any progress might not show up much in short term investment returns (it might even harm them for some sectors) but it would surely help in the long run.

And finally, as promised, here are documented side effects from sneezing. If any reader does pick up a cold over the Christmas period, please do be careful. Professor Adam Taylor from Lancaster University has done the work on the side effects to look out for:

“Check with your doctor immediately if any of the following side effects occur:

So better to hold in the sneeze to avoid the risk of ending up like John Hurt in Alien.

Alas, here are the known side effects of holding sneezes in:

 

 

Chris Brown, CIO

cbrown@ipscap.com

The value of investments may fall as well as rise and you may not get back all capital invested. Past Performance is not a guide to future performance and should not be relied upon. Nothing in this market commentary should be read as or constitutes investment advice.

 

 

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