Our Views on the Markets and the Economy
Articles, investment updates and economic analysis
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How should we view the implications of the US election? Financial markets have reacted positively to the election result, with equities strengthening globally, while bond yields remain low. This is despite two unfinished aspects of the election that the markets will need to keep focused upon: the contesting of the election result by President Trump; and control of the Senate to be determined by two run-off elections in Georgia in January.
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The UK, like the rest of the world, continues to face a global health crisis that has triggered a global economic crisis. It is only once the health crisis is over that we can address fully the economic crisis. Currently we are in a vaccine gap phase. This is contributing to a diverging performance globally, both in health and in economic terms.
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One hallmark of the UK economy has been its ability to cope with shocks. This is seen in its flexible jobs market.
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Yesterday’s measures from the Chancellor were necessary. His timely assistance focused on a new targeted and temporary job support scheme to replace the expiring furlough, easing loan repayment terms for firms and a wider, more flexible VAT regime.
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The government needs to unveil a pro-growth economic strategy. There is too much uncertainty about the consequences of the necessary policy-easing that has taken place.
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The dollar’s demise has been predicted often. It is being forecast again now with questions once again raised over its reserve currency status. Yet one lesson of the last major economic crisis to hit the world economy – the Global Financial Crisis of 2008 – was that in times of trouble there was still a strong appetite to hold the dollar.
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Since the beginning of the Covid-19 pandemic the health crisis has occupied centre-stage in Government policy. Now, following the Prime Minister’s speech last week in Dudley and the Chancellor’s Summer Statement today in the House of Commons, addressing the economic crisis and ensuring recovery has moved alongside the health crisis to the fore of Government policy.
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The UK economy is recovering. The unlocking will contribute to a significant rebound in coming months. After a swift but severe recession in the first half of the year the economy will likely grow at a solid pace over the second half of the year and at a steady pace in 2021.
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"The Great Lockdown" is how the Internatonal Monetary Fund (IMF) has described it, and it is hard to disagree. On Wednesday the IMF provided their latest update on the world economy.
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The next few months will demonstrate whether Downing Street is on top of the macro-economic agenda. If they are not, then the country is in for a rough ride.
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