A rising tide does not flaot my boat

Monthly retail sales data recorded a sharp drop in November, which is probably further evidence that the nation is concerned about the impact the economic measures in the budget will have on personal income and spending. According to a report from the British Retail Consortium, footfall across UK retail destinations dropped 4.5 per cent compared to the same period last year.

The monthly JOLTS data, which records the number of job openings in the US, continues to show a downward trend. According to Pantheon Research, October’s openings were still significantly 4.4% below their average in the first nine months of 2024. Low net hiring throughout October suggests payroll growth slowed primarily due to underlying weakness. In their opinion, this all reinforces the case for another rate cut from the Fed in December.

Problems in France continue. Michel Barnier faces a vote of no confidence, and Marine Le Pen is expected to join forces with a left-wing coalition to topple the government. France is not the only European country facing political uncertainty, as the Germans will likely go to the polls in February. The pound is up almost 5% against the euro this year, as is the dollar.

Europe is not the only region facing political instability. Overnight, news broke that South Korea’s main opposition party announced that it would seek to impeach President Yoon after he shocked the nation by briefly imposing martial law.

So, are we in a bubble that will shortly come crashing down around us? According to Ruchir Sharma, chair of Rockefeller International, we may well be. He highlights that the US now accounts for around 70% of the leading global index, up from 30% in the mid-1980s. By some measures, the dollar trades at a higher value than ever since the developed world abandoned fixed rates 50 years ago. America’s share of the global markets is just over 25% higher than its share of the global economy.  He does make one good point: money chasing US markets typically drags other markets higher, a rising tide lifts all boats; as the saying goes. In this case, today, the desire for US assets draws capital away from other markets. Mr Sharma believes we are the mother of all bubbles and that the US is over-owned, over-hyped, and overvalued.  As the other saying goes, markets can stay irrational longer than you can stay solvent.

Today’s main event will be  Federal Reserve Chairman Jerome Powell’s appearance in the early afternoon. He’ll be interviewed at the New York Times Deal Book Summit in his last public remarks before the Dec. 17-18 meeting of the Federal Open Market Committee. We also have the final reading for November’s composite PMI out later this morning and a speech from Governor Bailey. It will be interesting to hear his thoughts on the current state of the UK economy.