Friday Nov 1 2024 10:20
4 min
“If freedom of speech is taken away, then dumb and silent we may be led, like sheep to the slaughter.”
- George Washington
There was a chap on Question Time last night who said the Tories and Labour are as useless and ‘economically illiterate’ as each other. He’s not wrong, and he got a big cheer from an audience that seemed to reflect how cheesed off everyone felt. Unfortunately, there are ‘choices’ to be made and to be fair, raising the standard of public services like health is an economic benefit – just one that is quite hard to measure by the usual statistical wonks. But the choice made by the new govt does not seem to be terribly pro-growth, which seems strange, given what it is saying. It just goes back to everything I said since the Mais lecture – Reeves would be way more radical than people realise.
I said in May, "Chancellor Reeves could be way more radical than we think”. Her Mais lecture laid bare a radical socialist agenda, more radical than anyone was prepared to acknowledge in the election campaign. Many in the City and the business world in general were won over by the Prawn Cocktail offensive 2.0, but a leopard, like gnarled former Labour chancellors, doesn’t change its spots so easily.
And gee whiz...gilts are selling off again this morning with the 10yr gilt yield up to 4.525% - the chancellor will be watching this stuff nervously, even if we are still a way away from the kind of Truss-style moves. Sterling has firmed up a touch against the dollar, though the latter has dipped across the board. Nonfarm payrolls later will be crucial - US job growth likely slowed sharply in October due to hurricanes and strikes but unemployment is seen steady.
Now Moody says the Budget’s plans to borrow more pose an ‘additional challenge’ to repairing the UK’s public finances, noting the higher cost of issuing debt and the limited headroom for absorbing shocks. As I said on Wednesday, the Budget will inevitably require more tax hikes later in the parliament – to introduce austerity a couple of years before the next election is simply not a credible fiscal plan (as noted by Paul Johnson at the IFS)...it’s all lies.
On Wednesday morning I wrote – underlining added today
Budget Best Case: Market sees the Budget as being both pro-growth in the near term (it cannot really price productivity gains 3+years from now) and fiscally responsible. This would be the ‘buy the UK’ trade. The worst case is that it’s both bad for growth in the near term – higher consumption and employment taxes AND fiscally irresponsible. Gee whizz, what’s your money on?
We got the worst case!
European indices are a little stronger today, led by oil and gas stocks, with crude prices up for a third day, but it’s been a tough week, the Stoxx 600 was down more than 3% in October, and the FTSE 100 dipping to its lowest level since early August. US indices suffered their worst day in a month, led down by tech with MSFT and META both lower. The last two days have seen the S&P 500 wipe out its October gains. Is this the election wobble or just earnings? Apple beat sales and profit expectations with strong early sales of iPhone 16; the guidance was a bit light, though, and shares pulled back. Amazon rallied 5% pre-mkt, erasing a 3% decline in normal trading after it reported a beat on profit and revenue, with guidance solid enough.
Election watch – Bitcoin down to $69k and DJT shares -11% with a couple of polls indicating it’s not a slam dunk for Trump – even Polymarket odds have shortened for Harris.
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