Never thought I'd read this from this quarter, an analysis of the Tory 'mini-budget' (I see David McWilliams latest podcast also picked up on the phrase above).
Investors 'inclined to regard Conservative Party as a doomsday cult', says analyst
Investors seem inclined to regard the UK Conservative Party as a doomsday cult, according to Paul Donovan, chief economist of UBS Global Wealth Management.
In his morning comment, Donovan gives an absolutely blistering verdict on the government's plans:
The global signals from the UK's mini-budget matter. Modern monetary theory has been taken into a corner by the bond markets and beaten up. Advanced economy bond yields are not supposed to soar the way UK gilt yields rose.
This also reminds investors that modern politics produces parties that are more extreme than either the voter or the investor consensus. Investors seem inclined to regard the UK Conservative Party as a doomsday cult.
Tax cuts are unlikely to give the UK a meaningful medium-term boost (the supply constraints in the UK economy are more about health and education). A short-term "sugar high" is likely but may be limited. A high-income earner's rational response would be to increase savings in anticipation of future tax increases.
That point about 'modern politics producing parties that are more extreme than either the voter or the investor consensus' is intriguing. Who could he be talking about? It would seem reasonable to suggest that these are parties of the right - the Republicans most obviously, but also similar manifestations across parts of Europe and indeed in Italy most recently. That the markets, or rather those who represent them in some imperfect fashion, have woken up to this aspect is interesting, but have they realised how damaging they are more broadly in economic terms? Perhaps they have. But markets are notoriously unable to be self-controlling, as we have seen time and again. Getting the message sure, but too late.
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