The latest economic news and market highlights from the UK, US and Asia.
Key takeaways:
🏆 Trump returns with a red wave – US equities saw the biggest post-election bounce in history after Donald Trump’s election victory. The Republicans also gained control of the Senate and look set to retain a majority in the House, though it’ll take some time for all the results to come through.
✂️ US Fed cuts again – US interest rates fell to 4.5%-4.75% - matching expectations. Chair Powell left the door open for another cut in December, but markets anticipate a less straightforward path in 2025 due to fiscal policy concerns.
⚠️ UK rates fall to 4.75% – The Bank of England cut interest rates again, with a caution that terminal rates may need to be 0.5-0.75% higher to offset any inflationary impact of the Budget.
📊 Softer US jobs market – Continuing unemployment claims rose to 1.89M, slightly above expectations.
👋 Auf Wiedersehen, Scholz – German Chancellor Olaf Scholz looks set to depart after the collapse of his ruling coalition, which fell apart after finance minister, Christian Lindner, was fired.
What does that mean for you ?
During his last term, President Trump’s tweets often had a measurable short-term impact across a range of markets. If his second term is anything like his first, this could create opportunities for active management to capitalize on volatility.
The initial impact has already ripped through markets this week. US equities and Bitcoin reached new heights, and the 10-year Treasury yield surged 0.16% on Wednesday. On the one hand, investors have reset their economic expectations higher.  On the other hand, they now expect inflation to remain elevated as a consequence of Trump’s proposed policies.
Concerns over fiscal sustainability are putting a premium on government debt, both at home and abroad. In the US, tax cuts are anticipated to expand the nation’s debt over Trump’s term. Market concerns about the inflationary impact of the UK budget have increased borrowing costs in the week since, wiping out Chancellor Reeves' fiscal headroom.
On the surface this backdrop could be seen as positive for equities and more challenging for bonds. However, as always, it’s the change in expectations that impacts investor returns. The benefit of diversification is that it gives investors protection against divergent outcomes - with last week's events a clear reminder of how paths can change.
This article is for information only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Kuldev Sehra Wealth Management accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns. Â
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