Market Overview 2017-12-20
The Trump flagship tax reform program took a step closer to becoming law on Tuesday. Having passed a vote in the House of Representatives, the bill now passes to the Senate for final approval on Wednesday, before Trump gets the opportunity to sign off the reduction into becoming law. Questions as to what it must be like; to sign off a piece of legislation which could (according to some sources) reduce your overall tax liability by a billion dollars, will presumably not be put towards the U.S. president, as he takes the congratulations from the assembled mainstream media scrum in the Whitehouse, or on Capitol Hill. The reforms will cost circa $1.5 trillion in lost revenue over a ten year period, however, Republicans have argued (apparently successfully) that the loss isn’t zero sum, or offshored as there’ll be a form of trickle down, as the corporate tax reductions will be spent in the USA economy by the: stimulation of domestic orders, new equipment and employee recruitment.
The trickle down theory is a curious justification, given that major corporates haven’t paid the top rate of tax (35%) for some time and the trickle down effect hasn’t therefore materialised. Moving away from politics, housing starts in the USA have reached a ten year high in 2017, closing out the year with a figure of 1298k, only a cynic would suggest another sub prime mortgage debacle now awaits. Yen registered a loss versus the U.S. dollar, closing out down circa 0.4%, whilst the euro gained approximately 0.4% versus the dollar.
The U.K. govt finally got around to having a specific “Brexit meeting” on Tuesday (after circa eighteen months of doing very little) to establish what they actually wanted, in terms of a Brexit trade deal. They unanimously came to the decision that they should demand a bespoke deal, which would be amusing if it wasn’t so tragic, given that Michel Barnier the E.U.’s chief negotiator, instructed the U.K. on Tuesday evening that there’d be no bespoke deal and that it’d be impossible for Britain to retain E.U. financial passport rights, or certain euro denominated clearing functions, once the U.K. finally Brexits in 2019. Estimates of 75,000 London, City job losses, are now starting to look prescient, it must also be noted that this estimate does not take into consideration the other ripple effects; a massive hole in tax revenue, and ancillary job losses from industries that work closely with The City, such as: lawyers, P.R. firms, couriers, marketing and advertising firms, right down to employees who work hard behind the scenes to keep the show on the road; receptionists, cleaners, security guards etc. The previous U.K. chancellor George Osborne, estimated that the Brexit job losses could total 500k, and most redundancies would be centred in the south east of England.