Week ending 19th May 2017.

22nd May 2017

Global markets had a tough week, suppressed mainly by political noise and speculation.

In a week that was due to be relatively quiet in terms of economic data and politics, it was of course the US President Donald Trump that upset the band wagon! Following Trump’s sacking of the FBI Director James Comey (which steered uncertainty in itself), Comey and his associates referred to a memo he wrote following a meeting with the president alleging that Trump ‘heavily suggested’ that he drop a probe into the former national security advisor Michael Flynn shortly after Flynn had too been fired. The markets sold off following these allegations over worry about US political stability and affairs. This followed a previous allegation on Monday that Trump had disclosed sensitive intelligence to Russian officials. The shift in markets was driven by short termism and speculation, rather than fact and fundamentals. As, in reality neither set of allegations have been evidenced at this stage, with Comey unable to produce the alleged ‘memo’, or US officials any tangible proof that sensitive data was disclosed to Russia. So, although Western World political trust may have stumbled slightly, it is likely things will move on, with the US’s key relationships remaining strong.

Whilst one must be aware that the uncertainty that goes with a US president that is erratic (at best) will inevitably cause short term fluctuations in markets, as we have seen this week, fundamentals and relative valuations have not been effected by this ‘noise’. Let’s not forget, whilst this type of ‘noise’ introduces short term uncertainty, it impacts corporate valuations very little.

Thursday night gave the UK population a break from US politics with the first TV leader’s debate ahead of the snap general election. With Theresa May refusing to take part, and Jeremy Corbyn too not showing up, it remained a sanguine affair with the remaining party leaders using the opportunity to attack the Conservative and Labour leaders for not participating. Polling data remains strongly in favour of a Conservative victory and with viewing figures around 50% lower that the equivalent debate at the previous election, it suggests the nation’s interest in the rampant political affairs over the past year is waning.

Chinese President Xi Jinping hosted a forum of the ‘one belt one road’ initiative on Sunday 14 May, ahead of last week’s Market Summary, an initiative that takes its inspiration from the old Silk Road route! Xi pushed the trade route and infrastructure pact as a “big family of harmonious co-existence”, extending a welcome to any country that wishes to take part. As part of the forum, Xi pledged an additional £106 billion to the project that looks to link the trade of multiple countries including some of the major European powers. This is a huge positive for both global economic and political relations, as well as growth. This meeting was a big step to re-instilling long term faith and stability into global markets.

Jonathan Wiseman, Investment Management Expert*

 *Jonathan Wiseman is a Chartered Wealth Manager at Wealth at Work Limited which is a member of the Wealth at Work group of companies