Landslide, mind out below

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The UK will not be waking up to much of a shock today; the polls got it spot on as the Labour Party looks set for five years of government with a healthy majority. In very early trading, there has been little or no reaction from capital markets; the pound is where it started polling day, if anything a tad higher, and the FTSE 100, after a decent day yesterday, looks to build on those gains. It’s too early to see the reaction from the bond market, but if sterling remains calm, I imagine that, initially, at least, the bond market will do the same.  Markets so far are taking the Labour Party at their word. Let’s hope the new government pledge to get Britain working again does not come at the expense of those who have been working. I hope for the best, but fear that history records Labour parties do not have a record of leaving economies in better shape than they find them. That said, stock markets can do quite well under a Labour government.

One would imagine that Rachel Reeves would waste no time making her mark, rather as Gordon Brown did, freeing up the Bank of England. That’s when we shall see how bonds and sterling judge her, and they are often quick to judge.

In other news, stocks around the globe remain robust, as the Federal Reserve released the minutes of its last meeting. The members seem to be acknowledging inflation easing as signs of a weakening employment market is leading to a cooling of the broader economy. This gives further hope that US interest rates will be cut in the coming months. Biden’s bid to lead the Democrats to the next Presidential election in November remains uncertain as markets price in the probability of Trump’s triumphant return to the White House.  

The US market was closed yesterday for Thanksgiving. Later today, we will examine Friday’s nonfarm payrolls report to gauge whether weakening economic growth could allow the Fed to lower rates as soon as September. The next Federal Reserve meeting comes right at the end of July, Then they are on holiday until September.