Sunday, 10 September 2017

Stories we should be thinking about

Stories we should be thinking about

Macro matters


I see that Brexit chat has descended further into a mess.  As The Sunday Times notes:


Theresa May, UK prime minister, is planning to use a major speech in Europe this month to set out her proposals for a “no cliff-edge” Brexit transition deal, with ministers saying any interim agreement must be “as close as possible” to current relations.

While that message will resonate well with business and Brussels, Mrs May will deliver a much tougher missive to the Conservative party conference a few days later, promising Eurosceptics that her end goal is still to deliver a “clean” Brexit.

The prime minister’s decision to address Brexit in two different speeches — and to two very different audiences — reflects her two-pronged political challenge to protect the British economy from a difficult exit while holding her fractious political party together.


That sounds to me more and more like the quid pro quo of getting an agreement for an acceptable bill for Brexit combined with immigration control (note former PM Tony Blair’s contribution on this point today) - as nicely lampooned in the cartoon below:




(sourced from here)


Brexit remains a 3-D challenge - and overhangs the UK market/economy.  Compromise should win out...but a range of scenarios still exist.

Otherwise...the euro rally continues:

Hedge funds bet on a continuation of the Euro rally. Managers increase their bullish Euro bets by another 11% to highest level since May 2011

(h/t @Schuldensuehner)

Of course this is also partially because of hopes about a European economic renaissance and also because the dollar has been so weak per se - for reasons of high valuation and a bit of politics of course:


DJMMQ3zUEAAXEy3.jpg

Still the lower US dollar nor volatile US politics recently has not hurt the bull market in terms of duration.  The trouble is (akin actually to the strength of the euro) to continue apace you are going to need something like economic / tax reform to kick in...

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