It has been a tough week for the Prime Minister. David Davies resigned from Cabinet. Boris Johnson followed. It could hardly get worse or could it?
Donald Trump came to visit. I guess we have all made the mistake at some stage in our lives. Away on holiday you meet someone it would be great to see again. Or so you think. May met Trump and invited him to see the Queen! Shock horror.
It was Benjamin Franklin who said "Fish and Visitors" stink after three days ... Trump managed to create a stink on the first day of his visit with NATO.
An "ASBO in NATO" should have been the theme of the summit. Berating Western Leaders for not spending enough on US military arms and equipment. Germany came under attack for spending money with Putin on energy and gas supplies. Spend 2% of GDP immediately, no let's make that 4%, Trump demanded. Advisers and John Kelly squirmed as Tramp lectured over breakfast. It was all bluster for a domestic audience.
By the end of the trip the US had reaffirmed a commitment to NATO, committed to the reinforcement of troops in Eastern Europe. Russia was the common enemy. Trump may have a chat with Putin next week. Smaller nations may be given discounts and an easy payment plan to bolster spending on defence. Lease Lend will return to Europe, to ensure the 2% targets can be met and quickly.
"Trump offers lease lend to ensure 2% spending target is met"
Then on to the UK and an interview with The Sun. Boris Johnson would make a great Prime Minister. Nigel Farage should become Foreign Secretary. May had botched Brexit. No chance of a trade deal with the USA. If only the Prime Minister had followed his advice and taken a hard line with Brussels, threatening to Nuke Belgium, that sort of thing. So much for the special relationship.
Then Trump must have been warned he may not get to meet the queen after all if he continued in that vein. Melania intervened. The White House issued a statement. Sarah Huckabee Sanders said "The President likes and respects Prime Minister May very much. She 'is a very good person' and he 'never said anything bad about her.' He thought she was great on NATO today and is a really terrific person."
Yep a "really terrific person". An "incredible woman", a "very tough" negotiator, a "very smart", "very tough", "very capable" person. "I would much rather have her as my friend than my enemy." Trump extolled. The problem with Trump is it's difficult to know the difference between having him as a friend or an enemy.
Trump apologised for the article in The Sun, which was of course "Fake News". He awarded the "Highest Level of Special" to the "Special Relationship". "Am I allowed to go higher than that, I don't know". He looked forward to the trade deal soon. The chance to sell chlorinated chicken to the children of the UK an opportunity not to be missed.
After Chequers he travelled to meet the Queen, "A great honour" but then she probably new that. Then off to play golf in Scotland, before meeting with Putin what fun awaits ... you can overdo contrition ...
Is he still here? Yep but he will be gone soon ...
Growth hopes fade in the UK ...
US inflation hit 2.9% in June. US Growth will be around 3% this year. The Fed will continue with the rate hikes despite fears about trade tariff disruption. Markets rallied, the dollar moved higher. The trade deficit and government borrowing is increasing. The US economy is overheating. Still time to be long on the Dow and the Dollar for now.
Back in the UK, the ONS released the monthly GDP tracker for the first time ever. Growth in the second quarter will be up by 1.2% or 1.3% in the three month period. Growth in the first quarter was just 1.2%.
We have downgraded our forecast of growth for the year to around 1.4% as a result. With the lack of commitment to government spending on current expenditure and infrastructure, it is difficult to see a higher number. Anxieties about Brexit will continue to overhang investment in the private sector.
"We have downgraded our forecast for the year to 1.4%"
Manufacturing figures for the month of May were equally disappointing. Output in the twelve months increased by just 1.1% following a surge of 2.5% in the first quarter. We now expect growth of just 1.6% in the current year, following growth of 2.5% last year. Output remains 3.3% below the heady heights of February 2008. Ten years later, the sector has still not made a full recovery from the last setback before the next one, brought about by Brexit, is upon us.
Will UK rates rise next month? I doubt that. Sir Jon Cunliffe, Deputy Governor at the Bank of England warned there was not enough evidence to support a move to hike rates next month. He has given a clear indication, he is unlikely to vote for an interest rate rise at the August meeting of the MPC. "Policy makers should react slowly to signs of recovery in uncertain times" he said ...
The evidence on growth and output this week adds to the uncertainty about the immediate direction of monetary policy ...
Monday Morning Markets ...
This month we launched our Monday Morning Markets. It's a review we developed for Duff & Phelps some years ago. Time to bring it back now on our own book. The update will be released every Monday Morning at around 8:00am.
We look at key stock markets, bond markets, interest rates and currencies every week and monitor trends and direction in key areas. It's just for fun. We are not licensed for the giving of investment advice.
This week the nine indices we track were all trading up. The average across the territories of North America, Europe and South East Asia were up by 2%. We expect the bull run to continue despite the fears of world trade disruption and rising US rates.
"Don't Miss Our Monthly Updates and the Monday Morning Markets"
We also signed up with eToro to be included in the Monday Morning Markets Review. This social investment network is a great choice. It is FCA regulated. But you can start with a small portfolio of $1,000 dollars and trade without commission across a wide variety of stocks.
We have set up our "Empires of the Cloud" Fund with a start value of $1,000 to $10,000 dollars. A similar fund we modeled in a presentation at MBS in 2011, would have converted $10,000 dollars into $86,000 dollars today. You can set up your own account on eToro, and match mirror or follow the fund. We will update every week our progress in the Monday Morning Markets review. We were up 4% in the first week. The rally continues with a 2% gain this week.
We will follow the "Empires of the Cloud" Fund with a "Nine Index Tracker Fund" in due course. These are buy and hold funds, not short term traders.
Use this link to sign up to eToro and we get a $100 dollar kick back, you also get a $100 bonus. Hurry, we only have ten deals available. Looking to cover school fees, a holiday next year or provide for a nest egg. Why not follow or match our fund? All trading involves risk. Only use capital you are prepared to lose. This is a high risk portfolio, just for fun.
That's all for this week, we will be back next week, with more economics,
Have a great weekend.
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.