Daily Brief – US Election

US Election

Plenty to think about as we went into the weekend with Trump finally agreeing to a debate with his rival Kamala Harris on September 10th. That news was however quickly overtaken by the announcement that Trump has agreed to an interview with Elon Musk tonight. Given that the weekend polls now show that the Harris-Walz ticket has overtaken the Trump-Vance combination, it is safe to say that tonight’s interview will achieve top viewing ratings. This marks the start of the electioneering process that will be keenly followed by the financial markets as to what exactly is on the table from the two presidential candidates. In Harris’ case it is largely still unknown and in Trump’s given his loquacity on everything really, it is almost entirely unpredictable but is (currently) believed to favour a weaker USD.

EUR/USD 1.0917.

British Pound

Plenty of stories about GBP having a terrible run and stats being trotted out about the worst/days/weeks/month since whenever, but worth pausing for a moment before joining in with the general chorus of wailing and gnashing of teeth. Unlike say the EUR or the USD which have effective stabilizers due to their sizes, GBP comes from a much smaller economy and therefore is susceptible to sharper moves at a time of market volatility. Given the gyrations of both Bond and Equity markets on the back of firstly the Bank of Japan raising interest rates and immediately afterwards the Federal Reserve not cutting interest rates combined with softer employment numbers, it would be strange if GBP had not been buffeted. 

Markets and in particular market commentators have short memories: GBP has traded at between EUR 1.16 and 1.17 and USD 1.26 and 1.28 for much of 2024. In fact GBP/EUR began the year at 1.15 and GBP/USD 1.27. Spoiler alert as to where they are now below. Immediately after the UK election, sage market commentators applauded the “political stability” of a new government having 5 years to implement positive changes to the UK economy and given the disarray of the Conservative Party, likely longer still. So without listing all of the newsworthy market movers in the past 2 weeks, in addition to the violent reactions in the Equity markets, there have been domestic civil disturbances on if not an unprecedented scale certainly the worst since 2011, fears of a US recession and lastly the ramping up of geopolitical tensions in both Ukraine and the Middle East.

As we have written before GBP has been unusually lacking in volatility in recent times which is why a 2.3% move off its highs in the past month has garnered so many column inches. Markets will see that volatility continue until the factors above are overtaken by calmer and more easily predicted political and economic events.

GBP/USD 1.2760.

GBP/EUR 1.1690.

Italy

The attractions to the wealthy contemplating relocation to avoid tax of all that Italy has in respect of la dolce vita plus the no small matter of a EUR100,000 flat tax came to an end last week with the news that the flat tax has been doubled to EUR 200,000. In fact while the matter of an extra EUR100,000 is consequential, it is much less so for the uber wealthy. The break even is calculated to be EUR 7 million of assets where below that figure, people might reconsider their decision but above it, it will make little difference. The decision is in large part predicated by IHT or Inheritance Tax. In the UK above the threshold of GBP325,000 IHT is levied at 40%. Switzerland is predicted to raise their IHT to 50% for estates with net worth over CHF50 million. On that basis Italy with an IHT at 4-8% remains an absolute bargain.

EUR/JPY 160.00.

Qixi Festival

Saturday marked the 7th day of the 7th lunar month and all across China love was in the air for couples celebrating the Qixi Festival which is the Chinese equivalent of Valentine’s Day when trees are decorated with teas, flowers and fruits and sweet treats are consumed. It is also a time when the pressure is on to pony up a decent present and the luxury brands that as we have written previously have been having a rough time with USD 200 billion being taken off the luxury sector’s market value, are banking on an uptick in sales for all top brand luxury goods.

USD/CHF 0.8651.

All Night Long

This day in 1984 Lionel Richie closed the Los Angeles Olympic Games with this number to a worldwide audience estimated at 2.6 billion.

Well, my friends, the time has come
To raise the roof and have some fun
Throw away the work to be done
Let the music play on (play on, play on, play on…)
Everybody sing, everybody dance
Lose yourself in wild romance
We’re going to Party, Karamu, Fiesta, forever
Come on and sing along!
We’re going to Party, Karamu, Fiesta, forever
Come on and sing along!

All night long (all night), All night (all night)
All night long (all night), All night (all night)
All night long (all night), All night (all night)
All night long! (all night), Ooh, yeah (all night)

People dancing all in the street
See the rhythm all in their feet
Life is good, wild and sweet
Let the music play on…(Play on, play on, play on…)
Feel it in your heart and feel it in your soul
Let the music take control
We’re going to Party, Liming, Fiesta, forever
Come on and sing along
We’re going to Party, Liming, Fiesta, forever
Come on and sing my song!

All night long (all night), oooh, (all night) 

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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