Hello walls how are things today

Equity markets continue to shrug off any concerns from Trump’s ongoing barrage of tariff announcements, apparently happy to call his bluff. The latest threat is to impose 35% tariffs on certain Canadian goods, and once again raising the prospect of increasing levies on many other countries.  The president is likely emboldened by the current resilience of the stock market. Jamie Dimon expressed the view that he thinks markets are complacent in their lack of reaction to the potential impact the tariff wars could have.

The VIX index reached its lowest point since mid-February. Yesterday’s jobless claims report seemed to reinforce last week’s employment data, which continues to indicate that the US economy remains quite resilient. Retail investors stay optimistic about the outlook for stocks in the coming months, according to the latest AAII retail investor survey. The CNN Fear and Greed Index remains in extreme greed territory. Next week will serve as the next test for equity markets as the second-quarter earnings season begins. We also receive the monthly inflation report, which is likely to be the last major influence on interest rate sentiment ahead of the July meeting.

This morning, we had the latest UK monthly GDP estimate, along with the 3-month rolling average. We also got the monthly Industrial and Manufacturing reports. The monthly estimate reported the UK economy shrank by 0.1% in May, and the 3-month average dropped to 0.5%. Industrial production also came in weaker than expected.

It’s hard to find many optimists on the outlook for the UK economy. We spent the summer months last year wondering what Labour had in store for us when it came to the October budget, and that’s precisely what we are doing again this year. It was not good news last year, and it’s unlikely to be any better this year. Speculation of wealth tax on those with assets over £10 million, which, if introduced, will most likely encourage more residents of the UK to look for pastures new. The OBR’s assessment of the UK economy is that we are living beyond our means, and the problem is likely to get worse. Richard Hughes, the head of the OBR, believes the UK public finances are in an unsustainable position in the long term. I recall the mid-1970s, when Jim Callaghan was the Labour leader, and he was forced to call in the IMF to bail us out, on the condition that we introduce significant cuts to public spending. If the government cannot cut spending, the only other options are higher taxes, increased borrowing, and, once again, risk assistance from the IMF.