Another day, a lower pound and a higher FTSE for the ninth day in a row, an all time record. Another day and another uncertain run at a Dow-Jones round number of 20,000.
There is an increasing trans-Atlantic disparity between how markets are reacting to foreign exchange movements. The US is suffering spillover into stock trading as the dollar is taken down from its 2017 starting peaks. Meanwhile in other countries, like Britain, on the contrary, the currency's fall is boosting share prices. In both countries, political uncertainty is a factor, as untried leadership is set to deal with major economic changes. This probably means a “hard” Brexit for Britain which will focus on controlling immigration rather than maintaining special access for its financial sector. In the USA, a revival of protectionism coupled with deregulation may mark the end of post-World War II US global leadership of the nominally free world.
In my jaundiced view, both the excessive optimism shown by UK markets and the loss of zing by Wall Street, are based on misconceptions. PM Theresa May will not be able to ignore the demands of the UK's City—the globalized banking, insurance, and related sectors. And future President Trump will not have a free hand disengaging from relationships, commitments, alliances, and treaties, however much he may want to dump them, with Nato and other defense groupings; peace negotiators not just in on Israel-Palestine and Iran, but in other areas; Nafta and other trade overseers; organizations working on cooperation over taxes; market oversight, fighting corruption, counterfeiting, and just plain theft. To continue the cooperation it wants against terrorism, the Trump Administration is going to have to accept a lot of other global links.
It will also have to stop calling for a ban on Muslim immigration and give up plans to use torture on terrorist prisoners—according to Sen. Jeff Sessions, future AG. Similarly it will not be able to craft a border adjustment tax to penalize imports and favor exports under existing treaties, as the future Secy of State will have to tell his confirmation hearings. No Rio Grande wall paid for by Mexico. Neither will get the full reform packages they want out of their legislatures. Mrs May and Mr Trump will both have to compromise to achieve their main growth and nationalistic goals. Neither is likely to enjoy the gritty and boring details.
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