Capital IdeasTM
Investment insights from Capital Group
Market Volatility
Robert Lind
Liz Truss’s defenestration last week exposed deep divisions over economic policy within the UK government and Conservative party.
In winning the general election in 2019, Boris Johnson concealed these divisions by promising both higher public spending to his new voters in the ‘Red Wall’ (formerly Labour seats in the midlands and north of England) and tax cuts to his party’s traditional supporters in the affluent south east. The pandemic derailed Mr Johnson’s plans by boosting public spending and forcing the government to raise taxes. The Truss-Kwarteng fiscal gamble of the last few weeks was an attempt to deliver on the promise of lower taxes while boosting borrowing rather than cutting public spending. The implosion of that plan was the trigger for the latest bout of political turbulence.
Incoming prime minister Rishi Sunak will face some unpleasant realities about the state of the UK economy. Since the global financial crisis, the economy has struggled to generate productivity growth, which has hobbled the underlying growth rate. Output per head has grown at just 0.4% a year compared with an average 2% between 1971 and 2007.
UK output per hour
.png "UK output per hour")
Source: ONS, data to end August 2022
Our latest insights
-
-
Long-Term Investing
-
Emerging Markets
-
Global Equities
-
Emerging Markets
RELATED INSIGHTS
-
Long-Term Investing
-
-
Long-Term Investing
Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.