Last week, Boris Johnson finally got his wish to have an election, successfully passing a one-line bill through parliament. With talk of an election going on for so long, all the major parties were ready with their campaign launches hours after the date was confirmed, although none of the proposed policies so far will have surprised many voters. Currently, it appears most likely that the Conservatives will win the most seats and reach a majority; however, with six weeks of campaigning, voter opinions can change dramatically. The added complication during this election is the strengthening of the smaller and newer parties, namely the Liberal Democrats, Brexit Party and Greens. Furthermore, the use of tactical voting and local deals between these and the major parties will make forecasting the results incredibly difficult.
Third-quarter GDP growth for the US was released last week showing that the economy grew at an annualised rate of 1.9% over the last three months. This was higher than the 1.6% anticipated, although it was lower than the 2.0% recorded in the second quarter. Household consumption and government spending continued to be the primary drivers of growth, with flagging business investment dragging the overall figure lower. A robust jobs market supported the steady growth and data out last week suggested that this should continue. Non-farm payrolls for October came in ahead of expectations at 128,000, although the significant upward revisions to the prior two months was the real positive news from the release. Following these revisions, US jobs growth has accelerated from the prior three-month period, painting a much more positive picture than the majority of other economic data.
Federal Reserve Cuts Rates
While US GDP growth has held up relatively well over the last several quarters, this did not stop the Federal Reserve cutting headline rates once again on Wednesday, taking the total to three this year. Although, the move was anticipated by the markets which had almost entirely priced it in before the announcement. The more important information was the guidance from the Fed that they were looking to pause at this level unless there was a severe deterioration in the data. This led to the markets lowering the probability of an additional cut in December. Nevertheless, the consensus outlook is for 1-2 more cuts in 2020, suggesting that investors are still bearish on the outlook for the US and global economy.
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