Last week I wrote about private investors’ current appetite for idiosyncracy in stock picking. Analysing individual companies for their relative merits and value is what appeals to me most about direct equity investing and I am sure that feeling is shared by many users of this platform.
But it is hard to ignore broader economic noise when it is as loud as it has been this week. On both sides of the pond, politics is driving a narrative. Markets are currently behaving relatively resiliently but, without wishing to be too pessimistic, I fear the coming months may start to see the impact of decisions taken by those in the highest of offices.
Starting with the US, where a new round of tariffs came into effect on Thursday morning. We have filled these columns before with speculation about the possible impact of tariffs, but the truth is that it is almost impossible to know what is coming around the corner from Donald Trump. In addition to the tariffs imposed on many European and Asian countries this week, we’ve had the murky musings of a possible 100% charge on chips imported to the US, with a potential workaround for any company willing to showcase a commitment to investing in American manufacturing.
Those with more expertise on trade than me have this week talked about a new normal for international trade. One which favours far more localised buying and selling. The trouble is that for global corporations, this is not the normal on which they have built their businesses or their supply chains. While the likes of Apple and Microsoft have chief executives who are readily welcomed into the White House, that is not the case for all multinational companies in the US and I am wary that the impact of tariffs may start to impact profits.
The UK’s slightly worrying market outlook is less directly attributable to political decisions. But even the most staunch supporters of Rachel Reeves’ policies would find it hard to argue that her first year in office has been as pro-growth as she had set out.
On Thursday, the Bank of England voted to cut the interest rate to 4% in a vote which was significantly tighter than would have been expected even a month ago. Rapidly inflating food prices, alongside disappointing economic growth have once again raised the threat of dreaded ‘stagflation’. It…
