Every day this week had a top headline that is directly relevant to the market narrative at hand- some positive, some tragic. Flip flopping the expectation that the UK would be left leaderless for a period of months under a lame duck administration, a quick turnaround happened on Monday. Outgoing Prime Minister David Cameron announced that due to the resignation of the top contenders for his successor, that Home Secretary Theresa May was the only candidate left in the race. Effectively, this meant that an election was unnecessary and the process was swift to change leadership. While there may be a bit of grumbling here or there about whether it is truly democratic for the top government job to be decided more by power-broker politics than election, she is widely perceived as a steady hand which is good in an uncertain times. By Wednesday afternoon, Cameron had offered his resignation and the first female prime minister since Margaret Thatcher had taken the reins.
One of her first cabinet positions was Philip Hammond as Chancellor of the Exchequer. This seemed to further her image as putting responsible and stable leaders in key roles which served to calm the markets and people’s nerves. Of course, by Thursday this view was a bit undone when none other than former London Mayor Boris Johnson was appointed as Foreign Secretary. Granted, there is a separate “Brexit Minister” (officially named Secretary of State for Exiting the European Union) and an international trade minister but the appointment of Boris, who has a flair for theatrics and has said some relatively outlandish things about foreign politicians, has caused stirrings. Meanwhile, the Bank of England (BoE) decided to stay on hold in their most recent policy meeting causing the British Pound (GBP) to bounce a bit. In the communication, there is clearly an intention of providing additional monetary support later this year but the policy makers are waiting to see what kind of economic impact may actually occur first. It is likely that the European Central Bank (ECB) will take their lead at their upcoming decision. Finally, and tragically, a criminal attack on Bastille Day in Nice left a large and growing number of people dead with hundreds more wounded. With little information on the motivation for the attack, authorities and the news media have restrained from speculation for the time being. However, the violence occurring in Europe will continue to affect popular opinion and mood as elections occur across a politically fragile part of the world.