Over the last week, global attention has been focussed in on the US, with President Donald Trump vowing on Monday to order a military crackdown on once-in-a-generation violent protests gripping the US, saying he was sending thousands of troops onto the streets of the capital and threatening to deploy soldiers to states unable to regain control.
The dramatic escalation came a week after the death in Minneapolis of George Floyd, leading to the worst civil unrest in decades in New York, Los Angeles and dozens of other American cities. After being criticized for his silence on the worsening crisis, Trump struck a martial tone in a nationwide address from the White House garden, as police fired tear gas on peaceful protesters outside the fence. “I am dispatching thousands and thousands of heavily armed soldiers, military personnel and law enforcement officers to stop the rioting, looting, vandalism, assaults and the wanton destruction of property,” Trump said.
He slammed the previous night’s unrest in Washington as a “total disgrace” and called on governors to “dominate the streets”. “If a city or state refuses to take the actions that are necessary to defend the life and property of their residents, then I will deploy the US military and quickly solve the problem for them,” he said, denouncing “acts of domestic terror”.
The macroeconomic news continues to be weak, reflecting the impact of the lockdown. The latest installment being UK house prices, which saw the largest monthly fall for 11 years. The Nationwide House price index shows that UK house prices fell 1.7% in May, reducing the annual rate of price inflation to 1.8%, down from 3.7% in April.
The survey points to a 53% drop in housing transactions for the month of April year on year (HMRC). Nationwide states that whilst activity is returning to the market its own survey suggests that 12% of the population has put off moving as a result of the lockdown – with would-be buyers now waiting six months on average before looking to re-enter the housing market. Nationwide states that the medium-term outlook for the housing market is highly uncertain and will depend on the performance of the wider economy.
Despite this backdrop risk assets continue to recover from their lows, as market participants looked past widespread social unrest and pandemic worries, to focus instead on easing lockdown restrictions.
Global equity markets have all been moving higher over the last week and the oil price has also recovered from its low in mid-March; Brent oil has nearly doubled and is now trading close to $40 a barrel. It’s not just equity and oil markets that have had an interesting period; two weeks ago the UK sold a three-year government bond on a negative yield for the first time in its history.
Chief Investment Officer