Weekly View - More than a 'veep'
Joe Biden’s choice of Kamala Harris as his prospective ‘Veep’ marks her out less as a potential vice-president and more of a co-president-in-waiting. Ms Harris’ relative youth, her acceptability both to the moderate wing of the Democratic party and to more left-leaning, race and gender interests, means her candidacy has cleverly broadened the pro-Biden constituency. Her proven verbal skills will help fend off Republican attacks, articulate policy, and generally compensate for Biden’s shortcoming in this respect. Given the near certainty that Mr Biden – if elected – will be a one-term president, commentary has understandably centred on Ms Harris ultimately becoming a candidate for the top job in four years’ time. But that is to get ahead of ourselves. For the moment, the choice of Ms Harris makes the prospect of a Biden presidency even more likely. Increasingly, the presidency looks like a contest that is his to lose.
As with the US, the European Q2 earnings season comfortably surprised on the upside with some 59% of companies managing to beat net income expectations. While this lagged the US where the equivalent figure was 70%, notable in the European results was margin resilience, indicating impressive cost control through the pandemic – something that gives us further encouragement in terms of our support for European assets.
Economic data from the US this week also gives cause for cheer, with just a slight rise in inflation and jobless claims coming in below the 1 million mark – again, better than expectations. The story of US equity markets to date this year has been one of absolute tech dominance but this week we saw non-tech stocks outperform. As we return to something like normality we expect more balance with increased appetite for cyclical stocks at the expense of defensive assets such as US Treasuries.
The signing of the Israel-UAE accord is net supportive of financial markets. While by no means greeted with universal approval, on balance we believe it a plus for regional stability, particularly as other Arab countries are likely to follow suit over time, with their desire to form of an anti-Iran coalition proving greater than solidarity with the Palestinian cause.