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The funeral of George Floyd

Protests in the US following the death of George Floyd in police custody have now added a racially-charged element to US presidential election.

Protests in the US following the death of George Floyd in police custody have now added a racially-charged element to US presidential election.

by
Charles Stanley

in Features

09.06.2020

The funeral of George Floyd on Tuesday will lay him to rest, but not the issues that his tragic death pose. Days of legitimate protest and riots have opened new rifts in the US Presidential contest, whilst the question of racism is also being posed with new strength in many other parts of the world.

Radical Democrats in the US want to take money away from police budgets and move to a new community service. Mr Trump wishes the law and order establishment to reassert itself to combat violence against people and property. Joe Biden seeks a middle way for his party and its warring factions, proposing police reform.

Business will be involved in this. IBM has already announced it will not provide racial profiling services for police investigations. Manufacturers of tear gas, baton rounds, rubber bullets, pepper balls, bean bag rounds and tasers will all come under greater scrutiny over the nature of their products, their customers and the use made of them. There will be strong pressures to move from a police force with paramilitary uniforms and weapons to a police service relying on the gentler arts of investigation, persuasion and arrests without undue force.

Some US polling is bad news for big business, finding a majority of people are more concerned about police violence than they are about criminal deeds against property. Shrewd companies in an age of socially responsible investing will wish to be on the right side of the arguments about police reform – or will keep a low profile. Whilst this began as a US dispute, it has spread to many other countries facing the same tensions in their own experiences and history. We have already seen the wish to pull down the statues of Confederate leaders in the USA copied with the attacks on statues in Europe.

Economic outlook grim

Meanwhile yesterday the World Bank produced its new forecasts for the world economy. They make predictably grim reading. The Bank anticipates a 5.2% decline in world GDP this year. The advanced world falls by an average 7%, with the emerging world declining by 2.5%. The US with a fall of 6.1% outperforms the Euro area with a fall of 9.1%. Worse still, their forecasts for 2021 assuming all goes relatively well still leave the world economy below where it was at the start of 2020 by the end of next year. The recovery is a modest 4.2%, with the advanced countries only managing 3.9%. These forecasts may well be realistic.

City UK’s Recapitalisation Group also came out with worrying figures, seeing tens of billions of loans taken out by business to get through the Covid-19 crisis under government schemes or direct from commercial banks as being difficult for the borrowers to service. They are working on proposals to recapitalise a large number of businesses with new equity, and on ways of delaying or easing repayments. One idea is that some of these loans would only be repayable by instalment once a business had rebuilt its turnover from the Covid-19 hit.

None of this worried the markets

Wall Street got back to where it began the year, whilst the Nasdaq Index pressed on to a new high. Such is the power of money.

In the Eurozone, European Central Bank (ECB) President Christine Lagarde implied the central bank would seek a way through its German troubles with the Constitutional Court. The ECB and the Commission are working together to sustain a substantial fiscal and monetary stimulus. They know it has to rely more on Bank action given the attitudes of the member states from the surplus countries towards any large increase in the EU budgets. They are seeking careful evolution of the position, recognising that recent statements by surplus countries and by the German court do imply there are limits to how far important members of the EU are willing to go in constructing an EU wide large response to the crisis. Much of the heavy lifting as before will be done by member states own budget deficits, with the EU looking on and turning a blind eye to the violations of Treaty debt and deficit rules.

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