This site uses cookies: Find out more.

Market Viewpoints

"Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone."

Only a few weeks ago the market was weighing the probability of a recession risk in the US this year. Today, sentiment seems to have vaulted to the other extreme and is anticipating an interest rate rise in June, a move, that until recently, had been considered all but off the table. I am sorry that the market will be disappointed. The US Federal Reserve (Fed) may, at best, use its June meeting to telegraph that the probability of a rate rise is increasing. I suspect that even in July the Fed may sit on the fence and only raise rates in September. Let’s not forget that the elephant in the room is China and its currency, the Chinese Yuan (CNY). The USD/CNY peg creates a direct link between China and US monetary policy. Of course, some will argue – forget about the Chinese. That strategy however, was tested in August last year and January this year, with messy outcomes. The Fed has seen the trailer and I doubt they want to now sit through the full movie during an election year. There are less than four weeks to go until the Brexit vote. It’s very likely that the UK will vote to stay in the EU. However, referendums are not merely a consultative exercise but often have big long term implications. The 2014 Scottish referendum is a case in point. Although the majority voted to remain part of the Union, the Scottish National Party (SNP) emerged with unprecedented dominance over Scottish politics. The EU referendum will see a rise in Euroscepticism in the UK and certainly within the ruling Conservative party. The result is likely to be a UK that attempts to be more assertive in its dealings with the EU for years after a vote to stay

Read more