Please see below the Daily Investment Bulletin from Brooks Macdonald, received on 03/09/2024:
What has happened
A quiet start to the week was pretty much a given yesterday as US markets were closed on Monday for the US Labour Day holiday. With the US closed, there was less direction for investors in global equity markets. As a case in point, the pan-European STOXX600 equity index was practically flat yesterday, recording a marginal fall of just -0.02% in local currency terms, but still close to its latest record closing high it set at the end of last week. Overnight, Asian equity markets have also been trading in a fairly narrow range.
Euro area economic survey data
Euro area final manufacturing Purchasing Manager Index (PMI) data for August was out yesterday. Overall, there were upward revisions from the preliminary first-read data, with the Euro Area final print at 45.8 (slightly better than the preliminary reading of 45.6). That said, it was still below the 50-separation mark between month-on-month contraction versus expansion in broader economic activity. The flipside of the marginally better data is that it led markets to dial down very slightly the size of expected interest rates by December: by the close yesterday, investors were pricing in 61 basis points (bps) of cuts from the European Central Bank by year-end, down -1.8bps relative to the previous day.
US elections latest
In nine weeks’ time, we have the US elections to be held on Tuesday 5th November. The latest political poll surveys and forecast models are continuing to point to a very tight race. One projection from the company FiveThirtyEight is currently giving a 57% chance of victory to Democrat presidential candidate Kamala Harris, with 43% to her Republican rival Donald Trump. The polls are similarly tight, with company RealClearPolitics showing a polling average currently giving Harris a lead of 1.8 percent nationwide, but such a small lead is still inside the generally accepted margin of error of most polls.
What does Brooks Macdonald think
US voters arguably have two presidential candidates with pretty divergent policy ambitions. Democrat presidential candidate Harris is proposing selective price controls as well as tax increases on corporations, plus tax increases on high earners, in order to support low- and middle-income workers. By contrast, her Republican rival Trump is signalling tax cuts and deregulation in order to reduce costs for both consumers and businesses. As a result, in terms of the possible market impact, there could be some not insignificant relative different outcomes for investors to think about – that said, with such a tight political race currently, it is very hard to pre-emptively decisively factor either outcome into asset prices.
Bloomberg as at 03/09/2024. TR denotes Net Total Return.
Please continue to check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.
Charlotte Clarke
03/09/2024