Cambridge Weekly – 12th October 2020

Baffling market optimism

Following the unsteadiness of September, markets have further regained their composure and continue to
drift upwards. This stands in stark contrast to the flow of bad news. The White House, centre of power
for the mighty US, has become a COVID hotspot, similar to many regions across Europe and the UK.
Meanwhile, the Brexit negotiation noises have been loud enough to make those worried about the
economic impact of the pandemic even more ill.

And if the nation was split over Brexit, then the debate over the right way to deal with the second wave
of the pandemic is drawing yet more dividing lines. Our own Chancellor is said to be very much against a
further drag on the economy, while many other MPs are against renewed restrictions on freedoms.
Enforcement of social distancing is proving much less effective, especially when trying to do it locally. Rishi
Sunak is right to be worried by the stalling of the growth rebound across the UK’s service-sector dominated
economy, even though similar scenes are playing out across Europe and, perhaps to a slightly lesser degree,
in the US.

UK and EU

It may be the hundredth time saying this, but despite the all-dominating focus on COVID, it is now also
Brexit crunch time, given the UK government rejected the offer of a further extension when the lockdown
‘sabotaged’ the already tight negotiation schedule. Britain’s official transition period of EU membership still
only lasts until the end of this year, and, according to Boris Johnson, any deal needs to be agreed by next
week if it is to take effect on 1 January. European Union (EU) leaders will convene for a European Council
session on 15th October, and the Prime Minister has made it clear: “If we can’t agree by then, then I do not
see that there will be a free trade agreement between us, and we should both accept that and move on”.

The government has repeatedly tried to beef up its negotiating position with the ‘credible threat’ of a nodeal scenario. But recent noises from Whitehall have been more conciliatory. Reports suggest there has
been a breakthrough on state aid – an issue so emotive the government felt it may need to break
international law over. Hot topics remain on areas like fisheries, an area of low economic impact (but a key
Brexiteer talking point), and a relatively high emotional value in parts of the EU; and even here negotiators
seem hopeful. Michael Gove has gone as far as to say he sees a 66% probability of a deal happening before
next week.

Busting the Big Five of ‘Big Tech’

The US technology sector is full of winners. For years now, the growth-intensive strategies of the Silicon
Valley mega-caps have driven an astonishing rise to wealth, power and influence. Taking advantage of new
and uncharted territory, they have achieved a level of dominance in their various markets that we have not
seen for decades. In that respect, 2020 has been a great year for the ‘big five’: Amazon, Apple, Alphabet
(Google), Microsoft and Facebook. Online services have clearly been growing in importance for decades,
but having the world under ‘house arrest’ has supercharged this trend. In just six months, a good few years’
worth of switching to internet services has happened. People all over the world have relied on those five
companies for shopping, communication, entertainment, business and social interaction.

Read the full commentary here