Politics dominates the headlines
The first half of 2024 has proved another one in which those overweight techs have done well, and those with a more diversified portfolio have found it less easy. Stocks in the US finished the month on a soggy note as the S&P 500 continued to jockey close to its historic highs; the index made modest gains in the month. The monthly Personal consumption and Expenditure index was virtually unchanged in May, which supports the hope that the Fed will cut at least once this year. Michigan Consumer sentiment was revised higher, and encouragingly, inflation expectations were revised lower. To give one some idea of how the Nasdaq has driven the S&P 500 in the first six months, the Dow Jones Index is up 3.7% year to date.
This week will be all about elections; it would appear the far-right National Party is leading the exit polls, at least after the first round, as Macron’s party appears to be knocked into 3rd place. As France lurches to the right, it seems all but a foregone conclusion that Mr Starmer will be holding the keys to N010 by this time next week, and Rachel Reeves will be holding the purse strings. She will, on balance, inherit an economy that appears to be on the up. Inflation is back to the Bank of England target, interest rates are on the way down, and consumers seem more encouraged as wages are growing in real terms. Last Friday’s GDP report recorded that the UK economy grew faster than previously thought in the first quarter of 2024. Over in America, Democrats are apparently, not unsurprisingly, looking at ways to replace Biden.
Much has been made of the possible implications of a Labour government on those who have amassed assets; what will also show the cut of the new government jib is how they handle those who remain on strike. Hopefully, they will find a balance that gets the strikers back to work, is fair to employers, and will not have a detrimental impact on the wider economy.
In addition to the apparent events this week, the global monthly purchasing managers’ reports will be released. China’s economy has come under scrutiny, and the latest services PMI fell to 50.5; despite being the softest reading since last December, it did mark the 18th consecutive month of expansion.
The US markets will focus this week on payroll data and the FOMC minutes as market speculators continue to try to place their bets on the first cut. The number of new jobs added is expected to be well below previous months, adding to the belief that the employment market is weakening. We also get inflation rates for the euro area, German factory orders, and industrial production, which will be of interest to the underlying strength of the euro area economy.
Wimbledon starts this week with a chap called Sinner, the favourite to win the men’s. Hopefully, we will scrape through another leg of the euros; our next opponent is Switzerland, who knocked out Italy on Saturday. Coldplay at Glastonbury is worth watching on iPlayer. Stocks in Europe will likely start the second half of the year unchanged this morning