“Mrs Landingham, what’s next?”
Readers of a certain vintage may recognise the words of Josiah Edward ”Jed“ Bartlet, the much-loved fictional US president played by Martin Sheen in “The West Wing”, which debuted nearly 25 years ago in September 1999, arriving on British screens the following year.
In the rarefied corridors of political power, hyperactively scripted by Aaron Sorkin, the sharp-minded Bartlet ploughs through major tasks and political crises at breakneck speed, his pithy “what’s next” indicating it’s time to move on to the next task at hand.
The catchphrase came to mind this week as unseasonably warm weather in the City of London combined nicely with a series of upbeat pronouncements from the world’s central banks, suggesting that the global fight against inflation is all but over, meaning we can now all shift our focus elsewhere.
US markets rallied on Wednesday after the US Federal Reserve stuck to its script of three interest rate cuts for 2024, with Capital Economics putting the odds of a June cut at 80 per cent. The Bank of England’s Andrew Bailey sounded a similarly optimistic note the following day, saying that “things are moving in the right direction”, raising hopes that the bank will also begin loosening monetary policy in June.
Indeed, the long-awaited interest rate spring now for Western economies (major countries in LatAm, which generally hiked rates higher, have already begun cutting) produced its first cuckoo this week; in a surprise move, the Swiss National Bank became the first major Western industrialised economy to cut rates.
As with the weather in London, anything can happen between March and June; Adam Abbas, co-head of fixed income at Harris Associates, commended Fed chairman Jay Powell’s comments in an interview with Yahoo! Finance, while warning that “it’s too early to declare victory”. Nevertheless, it’s hard to deny that, all in all, it was “a week of certainty about interest rate reductions in the world’s main economies”, as UBS’s global wealth management chief economist Paul Donavan commented in a research note on Friday.
So, with the Fed and others likely to begin cutting rates ahead of the summer, “what’s next?” If you really need a hint, cast your mind back to the world of the West Wing.
“The main narrative arc for the first half of 2024 is going to be about the timing of interest rates,” a senior London-based banker told me last month. “The story of the second half of the year is going to be about the big elections.”
And while in the UK, British readers may flatter themselves about the importance of the next general election beyond our immediate neighbourhood, the November US presidential poll is what he was really referring to. For the West Wing fans that remember the later-season’s standoff between the likeable Matthew Santos and Arnold Vinick, the real world choices facing US voters later this year pale in comparison with their fictional counterparts.
With Trump’s return to the White House looking increasingly plausible, banks and major financial institutions should be spending much of their energy in the coming seven months sharpening their planning for what his second term may look like. Reduced support for Ukraine in its war against Russia, accelerated environmental deregulation, and an even more protectionist trade policy among the most obvious concerns.
The Trump effect has already had a seismic impact in the arena of global trade, with Joe Biden cleaving ever closer to his opponent’s protectionist policies, as his opposition to Nippon Steel’s acquisition of US Steel earlier this month makes clear. It’s all a far cry from the free trade stance of his fictional fellow Democrat.
As interest rates and inflation (hopefully) begin to recede as an overriding concern in the coming months, The Banker will be scrutinising the economic policies of the two US candidates, and their impact on the global economy as they become clearer on the campaign trail. For those of us that still miss the West Wing 18 years after its final episode aired, there’s set to be plenty of real life drama in the months to come.
John Everington is the Middle East and Africa editor of The Banker
