Dealing the political deck
- Trump has become the presumptive nominee of the US Republican party – the dilemma for investors is how to price that news into asset prices. There are multiple outcomes (over 30,000 elections in November, not just one), and policy positions are not yet clear.
- Uncertainty over politics should make markets glad that central banks are independent and run by economists – but there is division within central banks too (and regrettably fewer economists than there should be). Yesterday two Fed members spoke in favour of a June hike.
- US data includes non-manufacturing sentiment from the ISM, but sentiment data is apt to be swayed by media reporting rather than reality. Productivity and unit labour cost data are of interest to longer term economics, but terribly prone to being revised.
- The Euro area also gives sentiment data with services PMI numbers. The strength of the Euro economy in the first quarter is probably more important than sentiment fluctuations, however. Retail sales from the Euro area should lend credence to the idea of domestic economic foundations for growth.