St James Place : Contested connections

A keynote of the campaigns for Brexit and for Donald Trump was opposition to globalisation and, at its extreme, a desire to recreate the 'national economy' that predated the open borders and global supply chains of today. Last week, despite signs that those protectionist impulses will indeed be translated into policy action, leading stock markets enjoyed a strong run, while economic indicators provided plenty of New Year cheer, notably the US payrolls report - non-farm payrolls rose by 156,000, while 2016 wages saw their fastest annual increase since 2009.

Donald Trump threatened Toyota with a 'big border tax' if it failed to build cars destined for US customers in the 50 states. It was his first post-election threat directed towards a foreign company. Meanwhile, Ford scrapped its own plans to build a $1.6 billion car plant in Mexico, saying Donald Trump's policy plans had persuaded it to shift production to the US. It will now manufacture its electric and self-driving cars in Michigan, the old hub of the US auto industry, investing $700 million and creating 700 jobs. Meanwhile, Volkswagen learnt that US investors have been accorded the right to sue it over its emissions fiddling scandal, and the United States Department of Justice handed out fines worth $1 billion to RBS and Barclays for currency manipulation. Amid these frictions, the leading US manufacturing index showed its best reading in two years, and weekly initial unemployment claims struck a 43-year low.

This week's bulletin also includes:

• US payrolls data showed that 2016 wages had increased at their fastest annual rate since 2009.
• Donald Trump warned Toyota to produce US-bound cars in the US, or face a 'big border tax'.
• Data for the UK economy showed faster growth in the second half of 2016 - after the Brexit vote.
• Stock markets enjoyed a strong first week of the year - US and UK indices struck record highs.

View this week's Market Bulletin, which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.