Trump Triumphs

11 November 2024 

by Tony Redondo 

Donald Trump decisively won the US Presidential election, winning both the electoral  college and the popular vote on 5 November.  

In addition, his Republican party took control of the Senate and is on course for a clean  sweep in the US elections as they only need another eight out of the 24 uncalled seats  to retain control of the US House of Representatives.  

For Trump, this is an even more convincing win than he achieved against  Hilary Clinton in 2016.  

Currency Exchange Rates Update 

With so many pundits suggesting the US Presidential election was on a knife-edge,  it’s not surprising that the actual result caused a big reaction in the financial markets.  The Dollar gained over 1.5% in value in the 24 hours immediately after the result was  announced against the Pound Sterling and over 2.25% against the Euro. 

The Pound may have suffered like every other currency against the Dollar last week  but had a better week against the Euro, gaining over 1.3% in value.

What’s in the news? 

UK 

Good news 

The BoE (Bank of England) cut interest rates for the second time this year, this time  by 0.25% taking the Bank Base Rate down from 5% to 4.75% by an 8 – 1 vote split in  favour of the quarter-point reduction, suggesting a narrower range of views on the  MPC (Monetary Policy Committee). 

The MPC noted the recent budget provided “a substantial boost to debt growth and  inflation,” reinforcing their gradual approach to rate cuts. 

Not so good news  

The first Labour Budget for nearly 15 years saw the parallels with Kwasi Kwarteng’s  infamous 2022 mini-Budget emerging within hours. 

While an increase in borrowing had been anticipated, the downgrade in economic  growth forecasts was not. After all, this Budget comes from a government which only  told global investors less than ten days before the Budget that it was an  administration laser-focused on policies which would grow the economy and make  Britain the most attractive place in the world to do business. 

Those words already ring hollow after Reeves’s inaugural Budget piled taxes upon  taxes on the private sector and took the tax burden to its highest level since 1948. 

Whether the changes to employers’ national insurance raise the projected £25bn  annually is highly debateable, as companies are bound to scale back hiring. Add in the  rise in the national minimum wage and Britain might have a new set of inflationary  pressures.  

Bosses who took part in a conference call with the Business Secretary, Jonathan Reynolds, following the Budget did not hold back. Rami Baitieh, the  Morrisons CEO, warned of “an avalanche of costs”, while Simon Emeny, boss of pubs  group Fullers, said he would be forced to halve investment next year to £30m.  Sainsbury’s chief executive Simon Roberts has cautioned that new government 

measures will hit shoppers with higher prices by adding £140m to the supermarket’s  costs. 

One could be forgiven for thinking that Labour’s ‘growth, growth, growth’ agenda  referred to inflation, insolvencies and unemployment.

The KPMG (Klynveld Peat Marwick Goerdeler) and REC (Recruitment and  Employment Confederation) UK Report on Jobs index reported that pay growth has  slowed to its slowest pace since February 2021 as bosses warn Rachel Reeves’s Budget  tax raid will hit hiring with permanent wage growth dropping to nearly a four-year low  in October. 

Goldman Sachs has cut its growth forecasts for the UK. The investment bank now  expects the UK economy to grow by 1.4% next year, down from a previous forecast of  1.6% and expects growth to remain at 1.4% in 2026. 

Ryanair is cancelling one in ten UK flights in 2025 after the tax rises announced in the  Budget with Ryanair’s CEO Michael O’Leary saying it has “damaged” UK growth  prospects and “made air travel much more expensive” and branded the Budget air  tax rise ‘idiotic’. 

USA 

Donald Trump is planning to push aggressive tax cuts through Congress when he  takes office in January, passing key legislation in his first 100 days in office. The  President-elect ran on a platform of cutting a swathe of taxes, pledging to remove  taxes from tips, overtime pay and social security and also pledged to reduce the  corporate tax rate from 21% to 15%. 

The Federal Reserve also reduced borrowing costs by 0.25% last week. While  acknowledging uncertainties in the economic outlook, the Fed stated that “the  economy continues to expand solidly.”  

The EU 

Friedrich Merz has waited 25 years to become German chancellor and the  conservative leader’s best chance is now just months away. The head of Germany’s  centre-right CDU / CSU alliance is the clear frontrunner after Chancelor Olaf Scholz, a  Social Democrat pulled the plug on his three-party ruling coalition and called for early  elections. 

Scholz dismissed Finance Minister Christian Lindner this week, destabilizing his  centre-left government and ending its three-party ruling coalition. This upheaval in  Berlin leaves Europe even more directionless, as France’s government is also in a  deadlock. 

German economic data continues to go from bad to worse with the latest industrial  data showing a further fall of 2.5% in September including a 7.8% contraction in car  output with industrial production falling back to levels reached 18 years ago. The  German economy has now seen almost no growth since 2018. According to the  Bundesbank, companies including chemicals giant BASF, auto supplier ZF 

Friedrichshafen and home-appliance maker Miele & Cie have shifted resources out of  Germany, leading to a net outflow of capital of more than €650 billion since 2010. 

Others 

China’s exports grew at the fastest pace in over two years in October as factories  rushed to sell stock to major markets in anticipation of further tariffs from the US. Trump’s sweeping victory in the US Presidential election has brought into focus his  campaign pledge to impose tariffs on Chinese imports in excess of 60%. 

The Russian economy is on the brink after mortgage rates in some Russian banks  reached an eye-watering 43%, a move that is likely to have shattering consequences  for Russia’s property market. 

Recently, the Russian Central Bank raised interest rates to a historic high of 21% and  now on a par with those in Angola and Zimbabwe to combat sharply rising inflation. 

Quote 

Mark Twain, “Actions speak louder than words but not nearly as often”