US Open – Risks are piling up

Stocks end the week on a high

European stocks are higher on Friday, while US are making decent gains despite hopes of pre-election stimulus fading.

While Donald Trump has signalled a willingness to go big, after offering $1.8 trillion in aid, the Republican controlled Senate may not be on board which could be a major barrier to anything getting done before the election.

It’s a very bizarre situation in which everyone seems to agree that households and businesses need more support and yet, nothing may be forthcoming until January. At which point a signficant amount of damage will be done.

There’s a significant amount of uncertainty for markets in the coming weeks which could pose a downside risk. Under the circumstances, they’re doing very well. But you have to wonder how much investors can stomach.

There seems to be an assumption that stimulus will be agreed, a Covid vaccine will be successful soon and the election won’t be as disruptive as it could be. We all hope that’s correct but there’s plenty of risk in there.

Boris to lay out path forward for UK in negotiations

Closer to home, Brexit is another major downside risk as far as the UK and EU are concerned.

Prime Minister Boris Johnson is due to speak today on the path forward for the UK in negotiations after this week’s deadline was missed for negotiations, with the usual issues continuing to hold them up.

It would be a remarkable decision to call them off at this stage and one that could cause a big shock in the pound but I expect Johnson will instead perservere and maybe set a new deadline for talks to conclude.

A concession on level playing field or fishing could be a welcome move if the government really wanted to turbo charge negotiations but maybe that’s overly hopeful. The eleventh hour isn’t upon us yet, although it’s not far away.

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