The Anglo-centric view

True, that statement needs some finessing. The actual number of jobs lost was more like 8.5m at its peak. But, because the US labour force was expanding, just over 10m jobs were needed to bring the employment rate back to pre-recession levels. That process took 89 months as jobs were accrued at the rate of 116,000 per month.

Before focusing on the implications for investing, let’s digress to some details because these neatly put into data the reasons why so much of America – and, by implication, the developed world – is angry.

The section of the US workforce that remains far below its pre-recession level is that for white males without university degrees. At least, the employment rate for men has recovered more slowly than for women and – at 65.7 per cent – it is still 1.6 percentage points less than in 2007. Ditto for whites, where the employment gap is just 0.6 percentage points, but that’s wider than for both blacks and hispanics. Last, the employment rate for those with degrees is higher than in 2007, but it is still 2.5 points lower for those with no more than high-school qualifications.

It would be nice to think that the surge in the developed world’s equity markets is linked to this recovery in employment levels. Nice, but probably illusory since the creation of new jobs seems to have little connection to the creation of wealth. Quite likely, that’s a comment on the type of jobs being created. Dividing those US groups of workers by sex and ethnicity, it is striking that the one that has raised its employment rate more than any other is hispanic women. That implies an awful lot of new jobs in cleaning and child-minding. Simultaneously, the worst-affected group is hispanic men, which implies that jobs in construction have gone and aren’t coming back.

Meanwhile, the world’s equity markets sail merrily on and, according to investment bank Credit Suisse, the value of US equities as a percentage of all financial assets is now at its highest-ever level bar the spike of the dot-com boom.

From one view, this is just another sign that shares are overvalued and there are many others, from the price/earnings ratio on which markets trade to the eerie lack of volatility in their monthly price movements.

Also startling is the markets’ equanimity towards a confrontation with North Korea. Ever since the financial crisis of 2008 was analysed in minute detail, we have been aware of ‘black swans’ – improbable events that bring dire consequences – yet have shown no sign of being able to price them in (maybe that’s impossible, or unobservable).

Anyway, North Korea presents a clear and present danger of a black swan. The country’s gangsters have readily grasped that, in Donald Trump, the US has a president who will take every bit of bait thrown, and watching him gulp like an overweight carp brings great jollity in downtown Pyongyang. As a result, the world may be heading towards another Cuban missile crisis except that this time a demi-god and a septuagenarian addicted to instant gratification call the shots.

It’s not a happy prospect, but are the markets worried? Still, if you adopt a peculiarly Anglo-centric point of view, you can see why they’re not. As the table shows, when priced in the currencies of would-be suitors, UK equities have been left behind. The FTSE 100 has risen over 18 per cent since that fateful Brexit day in June last year, much in line with US equities and ahead of Europe’s. But expressed in terms of US dollars or euros, the Footsie is a complete laggard – up less than 5 per cent in dollars and barely more than 1 per cent in euros.

So, for overseas buyers, UK equities – relative to their domestic securities – offer a lot more bang for their buck. It makes you suspect that a takeover fest is heading the UK’s way and it explains, for example, the curious ability of shares in Unilever (ULVR) to build on the takeover premium established by the approach of Kraft Heinz (US:KHC) in February even though the US company retreated quickly.

Where Kraft sniffed, who knows how many others will go the whole hog, bidding for internationally-orientated brand-name Footsie companies, especially those that could be easily dismantled? With, say, shares in GlaxoSmithKline (GSK) down 6 per cent in dollars since the Brexit vote and those in Reckitt Benckiser (RB.) down almost 4 per cent in euros, the surprise may be that the fun hasn’t started. And who’s going to sell their FTSE 100 holdings with that as the backdrop?