Activity was particularly subdued in the difficult to interpret third quarter of the year, when USD 622.2bn worth of deals were struck globally, down 21.2% on 3Q18 (USD 789.7bn) and with 1,164 fewer deals than last year.

The US market, which had so far seemed immune to the global downward trend at play since the middle of last year, is starting to be impacted. At USD 262.9bn in 3Q19, US M&A is down 32.1% on 3Q18 (USD 387.1bn). Worth USD 1.25tn YTD, US M&A is still marginally up on the same period last year (USD 1.23tn), just about retaining a 50% share of global M&A activity, down from 52.5% in 1H19. Marred by the trade and tech war between Washington and Beijing and persistent political instability in Hong Kong, YTD M&A activity in Asia is down 26.5% over last year to USD 417.2bn.

Despite a small recovery over the summer, European M&A remains 29.4% lower compared to the same period last year, as a weakening European economy and geopolitical tensions continue to dampen activity. However, London Stock Exchange’s USD 27bn acquisition of US-based financial data provider Refinitiv, the largest deal globally in 3Q19, exemplifies the strength of European outbound M&A, which at USD 187.1bn is up more than 20% on last year and at its highest YTD level since 2016.

Beranger Guille, Global Editorial Analytics Director at Mergermarket commented: “Whether they are motivated by the desire to get more growth, or a way to secure future survival, deals are getting larger. On the back of the longest equity bull market in history, and amid persistently low interest rates, corporates have ample cash reserves and appealing debt financing options at their disposal to pursue M&A. This context and the growing feeling that it will not last forever are pushing valuations up.”

That possibility has pushed many government bond yields to new lows in recent weeks, while global equity prices have been volatile. Below Rhys Herbert, Senior Economist, Lloyds Bank Commercial Banking looks at the evidence.

And while some economic data might be confusing, I think there is a clear message.

First, that global economic growth has slowed and may slow further, and second, that there is a pronounced difference between weak or even falling activity in the manufacturing sector and still relatively buoyant service sector.

So, what might be causing this?

Manufacturing v services

It seems probable that the manufacturing sector is being hurt by the ongoing trade dispute between the US and China.  Indeed, the US manufacturing sector is now in decline for the first time in a decade.

And the Bank of England (BOE) flagged last week that, because the trade war between the US and China had intensified over the summer, the outlook for global growth has weakened.

The Bank’s Monetary Policy Committee added that the trade war was having a material negative impact on global business investment too.

The main impact is on confidence - or more accurately lack of confidence – which is holding manufacturers back from investing. As a result, we’ve seen a slowdown in world trade and in demand for manufactured goods.

In contrast, demand for services is being supported by relatively buoyant consumer spending. Yes, consumers are probably reluctant to splash out on big ticket items like cars right now, but overall, they are still willing to spend.

Consumers are probably reluctant to splash out on big ticket items like cars right now, but overall, they are still willing to spend.

The central conundrum

The key question going forward is whether it is more likely that manufacturing rebounds or that service weaken from here?

That is the conundrum that central banks need to weigh up in setting policy.

So far, the majority have decided that they are sufficiently concerned about the downside risks to take out some insurance and adopt policies designed to support economic growth.

Back in July, the US Federal Reserve did something it had not done for over a decade. It reduced interest rates – by a quarter point to 2.25% (upper bound).

It was widely seen as an insurance move against increasing global economic headwinds, emanating mainly from the US-China trade dispute.

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It repeated the move last month, lowering the target range for its key interest rate by 25 points to between 1.75% and 2%. The accompanying statement repeated July’s message that, while economic conditions are probably sound, a bit of insurance against downside risk was advisable.

Meanwhile, in his penultimate meeting in September, this month, European Central Bank President Mario Draghi announced a package of stimulus measures including a reduction in its deposit rate to a record low of -0.5% and the introduction of a two-tier system to exempt part of banks’ excess liquidity from negative rates.

He also announced a resumption of the bond-buying programme at €20bn a month from November and, importantly, signalled no end date to purchases.

Draghi can argue that the weak Eurozone PMI suggests the economy is stagnating, supporting this action.

But the UK has not followed this strategy.

On the sidelines

The BOE is still wary enough about potential inflationary pressures from a tight labour market and rising wage growth to talk about the possibility of interest rates needing to go up.

But last month, the BOE concluded that the longer that uncertainty goes on, the more likely it is that growth will slow, especially given the weak global economy.

We will see if the message changes, but the likelihood is that BOE rate setters will want to continue to remain on the sidelines and keep rates unchanged at 0.75%, not least because the Brexit outcome remains unsettled.

The government’s official preferred Brexit position is for a deal and that assumption in the Bank’s forecast points to interest rates rising “at a gradual pace and to a limited extent”.

But the BOE also noted growing concerns about risks to growth, joining the US Federal Reserve and the European Central Bank, which both seem to have decided that risks are skewed to the downside.

But, while escalating tariff wars, slowing growth in the US and China and Brexit uncertainty mean there are credible reasons to worry that 10 years of steady expansion could be coming to an end, it is still far from certain that the current slowdown means a recession is looming.

Celine Hartmanshenn, Global Head of Credit from Stenn Group, an international provider of trade finance, provides her thoughts on the deficit fall.

The trade gap between China and the US is shrinking, reflecting the overall softening of global trade volumes and hinting at the movement of supply chains out of China.

US macro indicators are mixed. Unemployment remains low and prices are in check. But consumer and business spending has cooled, manufacturing output is at its lowest level in a decade, and the services sector – which accounts for 80% of economic activity – is slowing down. The lingering uncertainty stemming from the trade war and sagging global economy has caused the outlook for 2020 to dim, with the expectation of the US limping along at 1-2% GDP growth. It’s not an outright recession, but it’s certainly not a boom either.

There’s no denying that the US-China trade war is a drag on the US economy. The disruption to supply chains is expensive for businesses, the tariffs now cover a wide range of goods, and because financial markets can’t quickly adjust, they are more volatile.

So, what’s the solution? Certainly not a tariff war with the EU. The US will implement its first tariffs on aircraft and agricultural goods in 2 weeks. The EU is likely to retaliate. The aftershocks could easily tip the US into recession.

The world will be watching this month as China and the US go back to the negotiating table. Whether they like it or not, these two economies are interconnected. China is dealing with massive overcapacity, high debt levels and a need for US dollars. And the US relies on China pumping these dollars back into the US to fund its debt.

Here Chris Heerlein, author of Money Won’t Buy Happiness – But Time to Find It,  and Investment Adviser Representative and partner at REAP Financial LLC, provides expertise on the little known tax breaks you could be making the most of.

The Tax Cuts and Jobs Act of 2017 gives us a lot to think about when crafting a financial framework. With the legislation scheduled to run through 2025, you want to be aware of certain provisions and exceptions in the tax-reform law and how you can take advantage of them.

State taxes

The tax-reform changes impose a $10,000 limitation on the deduction of state taxes. The IRS says that maximum does not apply to property taxes imposed on business property. For those of you with home offices, to the extent that you can allocate real estate taxes on your home to that office, understand that’s deductible outside or above the $10,000 limit.

Home equity lines of credit

If you take out a home equity line and use the proceeds to reinvest in your home, such as a new kitchen or a new wing in your bedroom, the interest remains deductible. But if you use those proceeds to, say,  pay off college tuition or credit cards, there’s no allowable deduction. We see families borrowing money on their home to use for repairs, improvements, and sometimes even to cover retirement income and keep their tax bracket under control. Borrowing home equity can be good, but you need to keep track of what you’re doing with the proceeds because if they’re invested in the home, you can still take a deduction.

Charitable contributions

These are deductible, as they always were, but the reason to be concerned about this category is the doubling of the standard deduction. Prior to the new tax law, only about a third of people in the United States actually itemized deductions. And after this increase in the standard deduction, guess what? It goes down to less than 10% of Americans.

Think about that: 90% of people will claim a standard deduction. Now, why does that affect charitable contributions? Well, as you may know, you can claim a deduction for a charitable contribution only if you itemize. If you don’t itemize and take the standard deduction, you get no tax benefit for charitable contributions. But here are some workarounds:

For people over the age of 70 ½ — the age when you have required minimum distributions on your IRAs and 401(k)s — there’s something called a qualified charitable distribution (QCD), and you can take up to $100,000 out of your IRA each year and basically have it sent directly to a qualified charity. This is a wonderful strategy for families that give small amounts and large amounts. And you avoid all tax on that distribution that ends up at the qualified charity. You can claim the standard deduction and still avoid tax on the IRA required distributions, but remember, the first dollars you give to charity should be money out of your IRA.

What about those of you younger than 70½? Here’s what you might want to do. This is a little outside the box but it’s a powerful strategy. Bundle several years or so of contributions to your qualified charity. Let’s pull five years out as an example. You can actually bundle these contributions into a single year so that you will go over the standard deduction in that one year and claim a deduction for the excess contributions. A Donor Advised Fund (DAF) is when families put money into the fund, they get the full tax deduction for whatever goes into the fund that year, plus they can distribute that money over time, at their direction. I recommend this a lot of times to clients, especially those taking the standard deduction.

Entertainment and meal expenses

There are some big changes when it comes to entertainment expenses and meal expenses. The new tax law disallows any deduction for entertainment expenses period. Meals — an integral part of business dealings, of course — are a bit different. The IRS says you can still deduct the meal expense as long as you have a separate receipt. Going forward, make sure that your food costs for clients are separately stated on those invoices and receipts. That’s a big one and can add up fast.

Then there’s the very important SSA-44 Form. Let’s say you’re a high-wage earner and you are going to work half the year when you retire at 65. You get off the employer health care plan and go on Medicare. Well, the government dictates your Medicare premiums by how much income you report. If you go over these thresholds, you are going to get a letter in the mail that says, “You’re Medicare premiums are going up.” And I’m talking perhaps $500-plus per person more for the same coverage your neighbor is getting. The SSA-44 Form is something you would file with your tax return in a year that you retired and were over these income limits, and they’ll give you a once-in-a-lifetime exception around those limits.

Nigel Green, the chief executive of deVere Group, which has $12bn under advisement, is speaking out after Beijing announced on Friday it will impose new tariffs on $75 billion worth of US goods and resume duties on American autos.

The Chinese State Council said it will slap tariffs ranging from 5 to 10% in two batches. The first on 1 September and the second on 15 December.

Mr Green notes: “China and the US are playing a dangerous game of brinkmanship which will inevitably dent global growth at a time when the global economy is headed for a serious downturn.

“Both sides are getting hurt by the ongoing tit-for-tat trade war and given that they’re the world’s two largest economies its negative impact is far-reaching and intensifying. There’s some serious collateral damage.

“It is likely that there will be further retaliations in the form of tariffs, punitive sanctions on each other’s nation’s firms and, possibly, currency devaluations.”

He continues: “The already volatile markets have been rattled again by today’s news.  Investors are getting spooked.

“However, the trade war will likely prove a blip for long-term investors.  

“Indeed, investors should embrace some volatility as important buying opportunities.

“Fluctuations can cause panic-selling and mis-pricing. Sought-after stocks can then become cheaper, meaning investors can top up their portfolios and/or take advantage of lower entry points. This all typically results in better returns.

“A good fund manager will help investors seek out the opportunities that turbulence creates and mitigate potential risks as and when they are presented.

The deVere CEO concludes: “Many savvy investors will be using the fall-out of the US-China trade war to generate and build their wealth.”

Digital banks raised over $1.1bn in fresh funding throughout 2018 in Britain, a figure that is set to be dwarfed if the current pace of growth continues to demand the attention of investors. Claudio Alvarez, Partner at GP Bullhound, explains for Finance Monthly.

Europe is truly leading the fintech charge, accounting for roughly a third of global fundraising deals in 2019, up from only 15% in the fourth quarter of 2018 according to our data. These are digital firms raising globally significant levels of capital. Adyen, the Dutch payment system, is now one of the frontrunners to become Europe’s first titan, valued at over $50bn. Europe has become a breeding ground for businesses that can go on to challenge US tech dominance, and it is fintech where we will find most success. Europe’s unique capacity for incubating disruptors is a phenomenal trend to have emerged over the past few years.

It’s true, European culture has always been more open to contactless and cashless, in contrast the US, where legislation and the existing banking infrastructure make adopting new technologies in banking slower and more convoluted. Europe has been able to take an early lead, while the US remains fixed on dollar bills.

As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease. European success garners the growth, momentum and trust needed to brave new regions and cultures. Monzo won’t be alone in the US for long.

As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease.

Whilst the Americans’ slow start has allowed European start-ups to become global players, it’s also true that the regulatory environment has distracted the European big banks and opened up the space for innovative and disruptive newcomers. While PSD2 has eaten up the resources of the incumbents, the likes of Monzo and Revolut have focused on consumer experience, product development and fundraising. The result? Newcomers are able to solve problems that older institutions simply don’t have the capacity to address.

However, a word of warning: traditional bricks and mortar banks aren’t dead yet. For one, digital banks will still need to justify the enormous valuations they’ve secured recently, and will have only proved their worth if, in 3 to 5 years’ time, they have managed to persuade consumers to transfer their primary accounts to them, which would allow digital banks to effectively execute on their financial marketplace strategies

Meanwhile, traditional banking institutions have a plethora of options to fend off the fintech threat and most are developing apps and systems that mimic those created by the digital counterparts. Innovation isn’t going to come from internal teams – it needs to be a priority for the old players and they need to invest in third party solutions to excel as truly functional digital platforms in a timely manner. In the first instance, the traditional banks will need to solve the issues that pushed consumers towards the fintechs and secondly, work on attracting consumers to stay by offering, and bettering, the services that make fintech’s most attractive.

Competition breeds innovation. For the fintech ecosystem as a whole, this new need for advancement is only good news – a rising tide lifts all ships. As traditional banks try to innovate and keep pace, we’ll see them investing in other verticals in the fintech market. Banks’ global total IT spend is forecast to reach $297bn by 2021, with cloud-based core banking platforms taking centre stage. Digital banking may have been the first firing pistol, but the knock-on effect of the fintech revolution is being felt across the board.

The fintech boom shows no sign of bust, market confidence is riding high and will continue supporting rapid growth. The aggressive advance of digital banks has opened doors for a whole host of fintech innovation - from cloud-based banking platforms to innovation in the payments sector. The number of verticals that sit within financial services creates a plethora of opportunity for ambitious and bullish fintechs to seize the day.

The comments from Nigel Green, founder and CEO of deVere Group, which launched its pioneering cryptocurrency trading app deVere Crypto last year, come after two days of congressional hearings this week to discuss Facebook’s planned digital currency, Libra.

It also follows Bitcoin’s impressive 9% jump on Thursday.

Mr Green affirms: “Many of the lawmakers’ stance on cryptocurrencies – which are almost universally regarded as the future of money – is out-dated and blinkered.

“Some of their comments in the congressional hearings suggest that they think cryptocurrencies are a passing fad. That is delusional. 

“The demand for digital, global, borderless currencies is only going to increase. This is inevitable as the digitalisation of our economies and our daily lives grows further and picks up pace further still.”

He continues: “And because demand is set to soar over the next few years as retail and institutional investors pile into crypto, lawmakers now need to embrace them and bring them fully into the mainstream financial system with proper and robust regulation. 

“It is bordering on negligent not to do so for three key reasons.

“First, it would provide further protection for the growing number of people using and investing in cryptocurrencies.

“Second, unless the US leads the way in the digital currency revolution, other countries - with perhaps counter values to those of America - will control it and it would be hard to ever take back that control.

“And third, there are enormous potential opportunities for higher economic growth by embracing cryptocurrencies. Why are lawmakers not seizing these with both hands?”

In a similar vein, the deVere CEO slammed President Trump last week when he criticised Bitcoin, the world’s largest cryptocurrency by market capitalisation. At the time he said: “Standing on the sidelines, or worse looking backwards, on the issue of cryptocurrencies - which are redefining and reshaping the financial system - is a baffling approach for the leader of the world’s largest economy to take.”

Mr Green concludes: “Digital currencies are the biggest innovation in payment systems in many decades. Facebook’s jump into the sector is a clear indication of the direction of travel in this regard and lawmakers must not put their heads in the sand and/or attack – that is futile and counterproductive. 

“Instead they must work alongside stakeholders to make the market stronger still as investors continue to dive into the likes of Bitcoin, Ethereum, Ripple’s XRP and Litecoin.”

Money makes the world go round, and it’s at the centre of our day-to-day lives for a variety of reasons. A 2018 study found that three quarters of Britons were worried about their finances, and further research concluded that over half of UK adults are concerned that their mental health is suffering in relation to money worries. So, what’s the current situation and how can we improve on teaching young people how to manage their finances?

We take a look, with some help from Business Rescue Expert, company liquidation specialists.

The millennial challenge

Millennials have brought a host of gaps in the teaching of finance to the surface, and countless studies have concluded that when it comes to money, this generation haven’t been taught adequate lessons. Millennials’ spending patterns stand in stark contrast to their predecessors; they’re keen to splash out on experiences and don’t often take to the idea of big commitment purchases seriously — for example, houses. Millennial spending habits signify the disparity of their knowledge and attitude towards budgeting — research has found that 60% of these youngsters said they are willing to spend more than £3.11 on a single cup of coffee, while only 29% of baby boomers would splurge for caffeine. A lack of financial literacy in education has undoubtedly played a role in this, with many young people under the illusion that simply earning a lot of money means that you’ll never be in any debt, along with a general unwillingness when it comes to making sacrifices for the sake of budgeting. One survey found that 42% of teenagers said that they wanted their parents to talk more about finances, and a staggeringly low 32% said that they knew how credit card fees and interest worked. Teenage years are pivotal points for learning, so why is financial literacy being left out?

Revised curriculums

Finances are complex and teaching them can require a lot of technicality and practical examples in order to make any sense. Lessons in finance differ from core subjects like English and Science, as they provide life skills which, if not learned, will be detrimental as kids grow older and enter adult life. One UK primary school created its own bank, to combat ‘below average’ financial literacy learning. Despite financial literacy being introduced to the national curriculum in England in 2014, not everyone believes that school is the place for financial education. Some believe the duty should be on parents to teach their children the real value of money and how to approach it. It’s worth noting that in private schools, faith schools, and academies, it isn’t a compulsory part of the curriculum, so many youngsters would still miss out on these lessons. A lot of schools who do incorporate it into the school day compartmentalize it into general ‘citizenship’ lessons, but it’s arguable whether enough emphasis is placed on it here.

The benefits of teaching financial literacy

The areas of financial literacy currently covered under the national curriculum include savings and investments, pensions, mortgages, insurance, and financial products. It’s still a relatively recent introduction to schools, so not all teachers may feel confident in teaching it yet, due to the specialised, complex nature of the topics. There is also the matter of religious differences in the approach to and teaching of these finance lessons. Followers of the Islamic faith are prohibited from using any form of compound interest. This relates to things like conventional mortgages, student loans and car loans, all of which are commonplace in many other cultures.

For this reason, making financial literacy universal, understandable, and an essential part of learning can be difficult. Maths might seem like an obvious place to drop lessons of finance in amongst existing content, but debate is rife as to whether subjects like trigonometry are still deserving for a place on exam papers, when finance lessons could take their place and provide long-lasting life skills.

While there is undoubtedly an absence and lack of depth in financial literacy, these lessons could become more popular in the future. These skills will prove invaluable for youngsters as they progress through life, and they could eventually counteract the stereotype of a financially irresponsible or illiterate millennials.

This Customer Experience Exchange for Banking, Financial Services & Insurance (BFSI) is an outstanding opportunity for you to learn lessons from the most successful financial institutions in the field. In just two days out of the office you’ll save months and potentially years of strategy heartache. You'll hear from leaders from across North America talk about their winning strategies in Financial Services, Banking and Insurance.

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Here's the story of how the country's largest bank got to where it is today.

Biographer of J.P. Morgan Jean Strouse, longtime bank analyst Mike Mayo and CNBC banking reporter Hugh Son help tell the story. You’ll learn about how Aaron Burr and Alexander Hamilton are part of the bank’s history, along with the first ATM, and the company’s position moving forward into the future of digital banking.

The comments come ahead of the recent TV debate between Boris Johnson and his rivals to be the next leader of the Conservative party and British Prime Minister.

Mr Johnson has been publicly open about a no-deal Brexit, which has weighed heavily on the pound.

The deVere CEO’s observation also comes at a time as Bitcoin, the world’s largest cryptocurrency, hit a 13-month price high on Sunday above $9,300, with predictions of the next crypto bull run making headlines.  Bitcoin prices have soared more than 200 per cent over the last several months.

Mr Green comments: “It looks almost certain that Boris Johnson will be Britain’s next Prime Minister.  His vow to leave the EU in October — deal or no-deal — has prompted a decline in the value of the pound.  

“Sterling has lost almost 5% of its value against the US dollar since the start of May.  Similarly, it continues six straight weeks of falls against the euro.

“As Mr Johnson’s campaign moves up a gear – as it moves into the next phase to win over the party’s grassroots – we can expect him to also up his hard Brexit rhetoric and this will likely drive sterling even lower.”

He continues: “We are already seeing that UK and international investors in UK assets are responding to the Brexit-fuelled uncertainties by considering removing their wealth from the UK.

“One such way that many are looking to diversify their portfolios and hedge against legitimate risks posed by Brexit is by investing in crypto assets, such as Bitcoin.

“Crypto assets are often used around the world as alternatives to mitigate geopolitical threats to investment portfolios.”

He goes on to add: “The no-deal Brexit issue might be the catalyst for new investors in this way, but they are likely, too, to be aware that many established indicators and analysts are pointing towards a currently new crypto bull run. 

“As such, they might think this is now the time to jump into cryptocurrencies - which are almost universally regarded as the future of money.”

In May this year, deVere carried out a global survey that found that more than two-thirds of HNWs - classified in this context as having more than £1m (or equivalent) in investable assets - will be invested in cryptocurrencies in the next three years.

The poll found that 68% of participants are now already invested in or will make investments in cryptocurrencies before the end of 2022.

Of the survey’s findings, Nigel Green commented at the time: “Crypto is to money what Amazon was to retail.  Those surveyed clearly will not want to be the last one on the boat.”

The deVere CEO concludes: “As Boris and Brexit continue to dominate the agenda, Bitcoin and the wider cryptocurrency sector could experience a boost as investors seek to protect – and build – their wealth by hedging against the geopolitical risks they pose.”

(Source: deVere Group)