Week Ending 01/08/2025: Turnberry trade deals – and Powell stands firm
This week, Jeremy and Gareth talk Turnberry and trade deals - with a backdrop of some tech titans' Q2 earnings reports with such strong results that "American Exceptionalism" seems as strong as ever. The anticipated dispersion of capital to other venues will have to wait, as AI spend dominates and American giants are mainly the beneficiaries.
The US FOMC decision (to leave rates unchanged) allowed Jay Powell to highlight that the credibility of the Fed relies on his ability to not bow to political pressure - highlighting that risks lie in both directions. Jeremy's comment is that reduced rates could let the genie out of the bottle, with inflation expectations significantly heightened and permanently elevated. If the US is run like an emerging market, it could well end up with emerging market inflation - and interest rates - with major implications for all of us. Meanwhile, Scott Bessant is looking to stablecoin mechanisms and untapped bank liquidity/leverage to help plug the gap in demand for US treasuries...
Next month sees the Jackson Hole gathering of central bankers - but next week we have the UK MPC interest rate decision. Markets are expecting a 25 basis point cut - but Jeremy cautions that the UK doesn't often like to jump the gun on rate moves, so the US "hold" this week might spell trouble for those expectations.
Gareth talks about Progressive clients STV, IG Design Group, Forterra and SDI Group, and Jeremy highlights the strength of the UK market, buoyed partly by bid activity - with £3bn of incoming capital for IPF and Just Group, both of which saw takeover announcements.
Looking to the next week, US non-farm payroll data will show how the economy is coping with both tariff impacts and the changed migration dynamics in the US job market. US PMI and UK rate decisions are due next week, but the main event is still likely to be Trump-related, whether and how much he provokes genuine and material trade wars with China, Canada, Mexico, Brazil...or others !
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