The state of things

Posted by: Paul Donovan

04 Feb 2020
  • The US Democratic Party’s Iowa state caucuses have yet to declare a result. Markets probably care because some candidates are seen as more market-friendly than others. US President Trump is to deliver the State of the Union address, while still being tried on impeachment charges. Markets probably do not care. US politics is gridlocked, reducing the value of policy pledges.
  • The state of the US economy is OK. Employment is good and wages are rising, but investment is damaged by the political uncertainty caused by trade taxes. The state of political polarization may cause some longer-term concerns, however.
  • In the UK, the interminably tedious EU-UK divorce remains interminably tedious. UK Prime Minister Johnson has been threatening to leave with no deal over trade. This may be a negotiating tactic, but sterling was less than happy at the suggestion and weakened.
  • US factory orders data is due. This may be worth a glance. Sentiment opinion polls have tended to be more pessimistic than reality (at least until recently), so it is a good thing to be reminded of the real world. The Eurozone gives producer price inflation, a sign of corporate pricing power.

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