Markets ignore complete break talk

Posted by: Paul Donovan

24 Aug 2020

Daily update

  • Economists keep hitting "refresh" on the economic data calendar, but absolutely nothing of any interest is showing up. True, economic data is till so imprecise as to render it a very vague signpost of the future, but the absence of any information leaves markets subject to the randomness of political comment and tweets.
  • Over the weekend, US President Trump speculated about a "complete break" between the US and China (presumably on trade). Markets have ignored this. Investors recognize that rhetoric on this topic will increase during the Republican Party convention. Investors may also discount the president's comments in the light of opinion polls.
  • The Federal Reserve's Jackson Hole summer camp for economists and central bankers is virtual this year. This is a crisis requiring fiscal policy more than central bank policy. However, investors may be interested in any debate on the tax on savers that negative rates represent.
  • UK Prime Minister Johnson is urging parents to send their children to school. The unspoken reason is that this will boost UK GDP. The UK has a lot of working parents, and education output in GDP depends on children in classrooms (unlike other countries). This difference in calculating GDP thus matters to the UK economic bounce-back in the third quarter.

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