Good morning, this is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's 3.30 in the morning London time on Wednesday the 5th of November. The economic data calendar today is simply awash with central bankers, scenting the glories of international publicity and rushing towards the nearest microphone.
There are no fewer than nine central bank speaking events, ECB President Lagarde personally accounting for two of them, and that is to say nothing of the Bank of Japan's minutes later on. Will markets care? Almost certainly not.
The US Federal Reserve and the Bank of England do have the advantage of some policy uncertainty, but it's unlikely that the comments today will change that. The lone Fed Speaker, Bowman, is speaking on financial supervision. The Bank of Japan minutes are perhaps the most interesting central bank activity today, and that is not something economists often find themselves saying.
Fiscal policy in the United Kingdom is genuinely more interesting. The UK has a rather weird obsession with the national debt, which is actually pottering along in a fairly normal way, but which also excites shrill cries of angst from the media. UK Chancellor Reeves was hinting at tax increases yesterday, in a way that makes people imagine that more meaningful fiscal tightening may in fact be announced later this month.
The average UK household pays one of the lowest income tax rates of any developed economy. However, telling average households that they need to pay more tax to enjoy the services that they want is less politically palatable than attacking other groups in society. Scapegoat economics rarely attacks the average.
France's fiscal policy is on display with the September fiscal borrowing numbers. These are not normally something that would be considered market moving, but with the revolving door of French governments recently, fiscal policy has moved up the agenda. France is unlikely to experience a funding crisis because it has more than enough private wealth that could be mobilised to help fund the debt.
But the pressure for some kind of credible fiscal policy remains. The off-year US political races will attract comment and quite a lot of angst from political geeks who tend to think that ordinary members of the public care about policy nuance in the same way that they do. What was potentially more interesting yesterday was the National Association of Realtors in the States reporting that the median age for buying one's first home in the US is now 40 years old.
The home is the most important single asset that most people will ever own. Buying later means that there will be less housing wealth accumulated before retirement. The fact that this implies home purchases out of reach for the younger generation is also likely to signal changing saving behaviour.
Why invest in a relatively stable financial asset if there is no point trying to accumulate the deposit for a house? The desire to speculate in non-assets like meme stocks, NFTs and crypto becomes more understandable in this context. Still irrational, but more understandable.
That's all for today. Have a good day. This material has been prepared and published by the Global Wealth Management Business of UBS Switzerland AG, regulated by FINMA in Switzerland.
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