2019 began in the middle of what eventually became the longest US government shutdown in history. Running from midnight on 22 December 2018 until 25 January 2019, it was the second federal government shutdown during Donald Trump’s tenure. The President’s approval rating nosedived during the shutdown and he eventually agreed to sign off a stopgap bill to reopen the government for three weeks.
In the past few days, there were fears that there would be another shutdown, as both Democrats and Republicans didn’t sound too confident that a funding agreement could be reached. However, yesterday it was confirmed that negotiators have agreed to allocate $1.4 billion to border security – far less than the $5.7 billion Trump demanded. The President has come under fire for essentially inventing a problem in order to fulfil one of his main campaign pledges. His opponents say that border security money would be better spent on personnel and technology, rather than building a wall.
Stock markets around the world opened higher as the news filtered through. While progress is of obvious immediate comfort for investors, most of them will be watching closely for any developments in trade talks between the US and China. Indeed, the Bank of America Merrill Lynch’s latest fund manager survey shows that the US-China trade war is the biggest worry for investors at present. Interestingly, the survey shows that money has been moved out of stocks and into cash this month, suggesting that a correction could be coming soon.
Top officials from the US landed in Beijing yesterday to hold talks with President Xi’s top Economic Advisor, Liu He. Treasury Secretary, Steven Mnuchin, told reporters he was ‘looking forward to several important days of talks’, but it remains to be seen whether an agreement can be reached between the two largest economies in the world.
Speaking of agreements, Theresa May delivered a speech at the House of Commons yesterday that basically told nobody anything that they did not already know. The key point was that Jean-Claude Juncker, the European Commission President has, once again, said that the EU will not reopen the withdrawal agreement. However, May and Juncker have agreed to let their officials continue talks – though to what end is not known.
On the economic data front, everything was pretty quiet yesterday, but today we will see inflation rates from the UK and US, as well as industrial production figures from the eurozone. The euro area’s economy has been performing rather terribly of late, so it will be hoped today will hold more cause for optimism. Having said that, the markets are expecting a year-on-year decline of 3.2% in December.
As always, all we can say is no-one truly knows where the markets are going. You can easily protect yourself from this risk: simply lock in your exchange rate with a forward contract. Speak to your Personal Trader on 020 7898 0541 to find out how. And don’t forget to refer your contacts who would benefit from Smart’s services – you will earn yourself Smart rewards as soon as they begin to trade.