More taxes make markets nervous

Posted by: Paul Donovan

03 Oct 2019
  • Equity investors do not like taxes. US President Trump announced higher taxes for US consumers, in a trade dispute with the EU. The EU is likely to announce taxes on EU consumers of goods partially made in the US. The two sides do not seem to be trying to resolve the dispute. Markets worry about more taxes at a time of economic slowdown.
  • UK Prime Minister Johnson praised UK exports, highlighting sales of Jason Donovan's compact disc to North Korea. (Compact discs of my greatest hits do not sell in North Korea). Plans to conclude the interminably tedious EU-UK divorce were well received by the Conservative Party. They were not as well received by the EU. Markets do not assume the plans will succeed, so did not react.
  • US Fed President Williams highlighted the strength of the US economy to date, but noted the investment and trade uncertainties ahead. The comments were more prudent than dovish. It is worth remembering that central banks look at the whole economy. Equities are disproportionately hurt by trade taxes, and do not necessarily reflect the whole economy.
  • US durable goods and capital goods data is due. There are assorted service sector sentiment polls from around the world.

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