Fiscal floundering
During a week when global stock markets continued their more gradual upwards trend, government policy was in full focus, but offered little in support. For the UK, it looks like ‘out of the frying pan into the fire’ when official lockdown ends on Wednesday, with the vast majority of England under tighter restrictions than before – and for an indefinite period of time. Before that, the Chancellor of the Exchequer Rishi Sunak delivered his Autumn spending review in sombre style. The UK’s “economic emergency has only just begun” warned Sunak, adding that debt-financed pandemic spending is “clearly unsustainable”.
Sunak’s downbeat tone was backed up by a report from the Office for Budget Responsibility (OBR), which forecasted a £30 billion hole in public finances by the middle of the decade. As well as plunging Britain into its deepest recession in over 300 years (although perhaps also the shortest), government borrowing is set to rise to its highest level in peacetime. In typical belt-tightening fashion, the Chancellor added: “We have a responsibility, once the economy recovers, to return to a sustainable fiscal position,”
This time, Brexit really does mean Brexit
In the strangest year in recent memory, one news story serves as a timeless constant: “Brexit talks remain deadlocked”, according to the FT’s headline last week (which could have been from any point in the last four and a half years). European Commission President Ursula von der Leyen told the European Parliament it was still impossible to predict whether Brussels could reach a trade deal with the UK. With Britain’s transition agreement with the European Union (EU) set to end on 1 January, reports suggest growing frustration in Brussels. “These are decisive days for our negotiations with the UK” lamented the President, “but frankly I cannot tell you today if, in the end, there will be a deal.”
Tesla jolts into S&P 500
The electric car maker Tesla’s stock performance this year has been – in an analogy that will no doubt please Elon Musk – a rocket in flight. At the time of writing, Tesla shares are up nearly eight-fold since the COVID sell-off in March, making it the most valuable car company in the world. And last week, the electric carmaker reached an important milestone. On 21st December, Tesla will make its debut on the S&P 500 index, after S&P Dow Jones Indices announced it would include the group on the US equity benchmark.
The index might as well roll out the red carpet while they are at it. Upon entry, Elon Musk’s company is set to become the fifth or sixth largest in the index – with a current market cap of nearly $550 billion. With the way Tesla has been moving over the last 12 months, that figure could be way off being accurate by the time of reading.