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19 Nov 2024 | 3 minutes to read
President-elect Trump’s Cabinet nominees - pending Senate approval - provoked strong opinions and some market moves last week.
Trump appointed Elon Musk and Vivek Ramaswamy co-heads of a new Department of Government Efficiency (DOGE) with a remit to reduce excessive regulation and unnecessary spending and restructure federal agencies. Musk suggests cuts to the federal budget of $2 trillion are possible, while Ramaswamy controversially proposes redundancies. DOGE may look to close federal agencies it considers non-essential and scrap regulations deemed unconstitutional, placing legislative power in the hands of elected representatives. The Environmental Protection Agency, Department of Education and even Department of Energy could be in the firing line.
Trump’s nominee for health secretary, Robert F. Kennedy Jr., is reportedly keen to root out corruption at America’s health agencies and cut entire departments at the Food and Drug Administration. Kennedy has many contentious views on public health. The Covid vaccine-sceptic’s nomination last week caused some pharmaceutical stocks to sell-off. RFK Jr. endorsed Trump in late August, dropping his campaign as an independent candidate.
UK economic growth slowed to just +0.1% in Q3, down from +0.5% in Q2, according to figures from the Office for National Statistics (ONS). Budget uncertainty potentially led businesses to delay decisions with ONS figures showing both services and manufacturing output slowed in Labour’s first quarter since their election win. Some businesses have publicly suggested that increases to employer national insurance contributions and the minimum wage add significantly to costs and deter investment.
Although a fall in manufacturing output and a lack of work in the IT sector weighed on the economy in September, offsetting a rise in auto sales, business investment increased +4.5% from the same period in 2023. The UK’s trade position deteriorated, as falling exports and imports mostly netted off, but consumers bought fewer foreign goods.
UK Chancellor Reeves was “not satisfied” with lacklustre GDP. Her first Mansion House speech highlighted areas she believes require reform - most notably, creating “mega-pension funds” pooling assets from 86 Local Government Pension Scheme (LGPS) authorities in the hope that economies of scale may deliver better outcomes for savers, while potentially also boosting economic growth by investing in UK infrastructure projects and high-growth businesses.
Bank of England (BoE) governor, Andrew Bailey’s Mansion House speech urged the UK to "welcome opportunities to rebuild relations" with the EU, while respecting the referendum vote to leave. He reaffirmed his political neutrality but said leaving the EU had "weighed" on the UK economy with "geopolitical shocks and the broader fragmentation of the global economy" ahead. No doubt he was referring to potential trade tariffs with America after Trump’s re-election.
The US Consumer Price Index (CPI) rose to +2.6% year-over-year in October from +2.4% previously - in line with expectations. CPI’s +0.2% October print was driven mostly by housing (rent). In his first speech since the US Election, US Federal Reserve Chair Jerome Powell stated that policymakers look past more volatile contributors to CPI, re-iterating “the economy is not sending any signals that we need to be in a hurry to lower rates”. US Retail sales data suggested the US consumer is resilient. It rose +0.4% month-on-month, above expectations of 0.3%.
PM Keir Starmer announced an ambitious climate goal last week: to reduce the UK’s emissions by 81% against 1990 levels by 2035, while aiming for a net zero emissions by 2050. Speaking at the UN’s 29th Conference of the Parties (COP) in Azerbaijan, Starmer also re-committed to the previous government’s £11.6bn of climate finance between April 2021 and March 2026.
World leaders continue to wrangle over actions required to limit long-term global temperature rises to +1.5°C - a target set by the Paris Agreement in 2015. Some experts believe the previous climate finance goal, of $100bn per year from developed and developing countries between 2020-2025, was only symbolic and a fraction of the sum needed.
A key issue now is whether Trump will yank the US from the Paris Agreement for a second time, after withdrawing during his first presidency.
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