After the UK markets closed yesterday, news got released that some of Prime Minister Johnson’s closest allies resigned from their posts in the cabinet with immediate effect.

There have been over 15 resignations during the past twenty-four hours with the two most high-profile being Chancellor Rishi Sunak and Health Secretary Sajid Javid. This does increase the risk that a no confidence vote may be triggered again, which could lead to a change of leadership for the conservative party and some form of election, however the appointment of Nadhim Zahawi as the new Chancellor of the Exchequer has been seen as a positive move. UK equity market indices have bounced on this news in trading today.

The new Chancellor has been doing the rounds on tv and radio channels this morning providing a more open stance on fiscal generosity and has pledged that he supports the Prime Minister’s view on more fiscal easing in the future. It seems that further tax cuts could be the most impactful way of implementing this, which would be a boost to UK businesses if corporation tax cuts are executed. If further easing measures are provided to UK citizens as well, this would be a timely boost to incomes at a time where the cost of living is squeezing everybody. With further increases to energy prices and additional interest rate hikes predicted for the near future, any easing for incomes would be a help to the UK economy, which is starting to slow due to higher costs and lower consumer sentiment.

As the investment team have stated over the past few months, with inflation higher and the risks of an economic slowdown increasing, governments will have to continue to provide further fiscal easing to help minimise the impact on their economies. Whatever the reasonings for the manoeuvre to more generous fiscal policies in the UK, we believe more needs to be done globally to keep economies from slowing down too quickly and other governments may have to follow suit. If they do, this will be a positive stimulus to underlying businesses and consumers, which should be reflected quickly in future asset prices.