Making sense of this crazy world
Andy Burnham announced at the Labour Party Conference the abolition of the triple lock state pension, in favour of what is described as the double lock. He also announced the free national care package in 2030. Whether Labour will remain in power to implement this remains to be seen. Clearly, the savings on the state pension won’t be enough to pay for the level of care required, and undoubtedly tax cuts need to happen. Watch out for the Budget!
Whatever your political persuasion, what I believe we should all be hoping for until the next election is stability. Having eight Chancellors in the last 10 years is not a good look! It does little to instil confidence.
The markets took the news of Burnham’s speech in their stride and bond yields even fell slightly, but bond yields yesterday rose again across developed countries, with UK borrowing costs rising past the 6% mark. US mortgage rates have jumped the most in four years too.
Christmas has come early for UK house builders as the government announced that they will be bringing back a reiteration of the ‘help to buy’ scheme. Shares across the sector rocketed.
As promised last week, we take a look at what assets are attracting attention and how Gross Domestic Product (GDP) growth has changed over time.
This week’s content:
- Running on hot
- Christmas has come early
- A big fat cushion
- World’s worst-performing stock market
- What’s trending in markets?
- The largest economies by share of GDP
- Conclusion
Running on hot
The apparent disconnect between rising bond yields, inflation, interest rates and equity markets running on hot is caused by more chaotic politics, according to JPMorgan Global Market Strategist, Hugh Gimber.
Hugh, well known to us at Blue Sky, suggests that governments committing to higher spending is fuelling equity markets but hurting bond markets. “It might be energy security, it might be food security, it might be national security in general form of defence”. Every government is saying “to make our country more secure, we need to spend more money” (source: Investment Week).
For the bond markets, that means that government debt is in focus, with debt levels rising. The equity market, however, is not going to slow down anytime soon according to Hugh, when governments are committed to spending.
Continues…
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