The stock market has largely shrugged aside the shenanigans in Westminster, but the pound has had a particularly volatile time of it, falling to the lowest point against the US dollar for more than thirty years, but then recovering as the prospect of a no deal Brexit appears to recede. Make no mistake, though, the game is far from over.
The fact that shares have not fallen more than they have is mainly down to the international nature of our benchmark index. Drill down into individual performance, though, and a different story emerges. Sainsbury’s and William Morrison, both of which derive all their revenue from within the UK, are down from their high point of the past year by 41% and 32% respectively, though this doubtless has much to do with the competitive nature of grocery shopping.
Meanwhile, one of the most important announcements emanating from the government has taken place this week. Chancellor Sajid Javid issued the first Government spending plan statement in four years, announcing the end of austerity. The last was in 2015 from George Osborne, but the following year’s referendum and the dominance of Brexit saw this statement kicked into the long grass.
This review sets out how the Government plans to divvy up resources between the various departments, with Welfare, Health, Pensions and Education taking the lion’s share. All departments were guaranteed an increase at least in line with inflation and the more generous handouts had already been signalled by the Prime Minister. Unsurprisingly, given the events in Parliament this week, these proposals were condemned by the opposition as simple electioneering.
And it seems long awaited reforms to the Retail Price Index (RPI) will be coming before too long. This measure of inflation has been considered as flawed for some time, but instigating change has been considered too difficult at times of other priorities, despite the cost to the Treasury. Index linked bonds took something of a hit on the news, but it could be a decade before anything meaningful happens. In the meantime, trade disputes rumble on and these arguably will have far more effect on the stock market than the likelihood of a general election here.