Cambridge Weekly Update – 29th July 2019

The quick and the not-so-quick

It’s official: May is out and Boris is in. But despite the political changes this could bring, currency markets hardly reacted. £-sterling started the month at €1=£0.897, and remains at that level at the time of writing. It has weakened marginally since last weekend. Negotiators on both sides of the channel have signalled intransigence ahead of any new talks. Talk of an election before the Halloween deadline is growing. After Mr Johnson’s question-time pummelling of Mr Corbyn (Quentin Letts in The Times), markets may not fear the prospect of a left-wing government so much. The opinion polls will be interesting over the next few weeks. Still, Mr Johnson will not forget Mrs May’s electoral blunder and certainly won’t be eager to hold the record for shortest tenure.

Trump in 2020

US election campaigns are notoriously long. Despite being 15 months away from the fateful day in 2020 when Americans will choose their president (Tuesday 3rd November), the electoral machine is already up and running. The party “primaries and caucuses” are the first stage. The Republicans won’t have a contest so the focus will be on the Democrats.

UK Equities – looking through the sectors

Last week, we looked at the US market’s performance over the year, as well as the sectoral differences in performance and earnings outlook. This week, we turn our attention to the UK. Despite political upheaval, UK equities have returned around 14% year to date for GBP investors. That is a strong number, but not quite as strong as Global markets – up around 22% in Sterling for the same period.

Deal or No-Deal – New host, same game

The Tory leadership race came to a close on Tuesday, with frontrunner Boris Johnson emerging victorious. The markets’ reaction was pretty muted: with Boris being the big favourite for the job, the result was already priced in. Over the last month, sterling has moved lower against the US dollar, reflecting the markets’ concerns that the new Prime Minister increases the chances of a disorderly Brexit.

Read the full commentary here.