Financial markets experienced jitters as the possibility of a Donald Trump win in the upcoming US election moves markets. Bond prices and shares fell, while the cost of government borrowing increased. The “Trump Trade” is back, with predictions showing Trump’s odds of reclaiming the Oval Office are over 60%, and talk of a “Red Sweep” gaining traction. A Trump victory may lead to a larger budget deficit, corporate tax cuts, and a friendlier regulatory environment, potentially resulting in faster growth, higher inflation, and interest rates, as well as further trade protectionism.
The uncertainty over the US election is also causing concerns over interest rates and fiscal accommodation. With the markets trying to make sense of a potential Trump 2.0 presidency, volatility is likely to increase as the polling shows a tight race. In Europe, Brexit negotiations and the UK budget are influencing the pound, while in Germany, Chancellor Olaf Scholz is working to revive growth amid economic headwinds.
In addition, Halfords reported no sales growth in the last six months, reflecting consumer caution in discretionary spending. Inheritance tax receipts have risen, prompting discussions on potential changes to IHT rules. Labour and Liberal Democrat politicians are urging the Chancellor to consider wealth taxes and public investment in the upcoming budget. Overall, the public finances are facing challenges, with central government spending higher than anticipated, highlighting the need for a balanced approach to address the fiscal situation.
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