Britain has a new Prime Minister who has vowed to be pro-business and help consumers, but will that filter through to the stock market? Liz Truss is taking on both Britain’s top job and an economic challenge that would make most baulk. Inflation has reached double-digits, at 10.1%, and is forecast to rage higher still. Meanwhile, the pound has slumped against the dollar, UK borrowing costs are rising, business and consumer confidence is sinking and the Bank of England is warning about recession. Liz Truss’ desire to loosen fiscal policy in a – some commentators have observed – fairly untargeted manner (for example through a blanket cut to VAT), increasing debt significantly, is inflationary, all other things being equal. Given the backdrop, it will almost certainly be met with tighter monetary policy. This is likely one of the many factors leading to the huge surge in UK interest rate expectations over the last month. Freezing the energy cap is the most obvious policy path to take and Truss’ much touted tax cuts might bring some relief to consumers, but it is likely still to fall short of re-powering the economy into overnight growth, most commentators believe. The current cost of living crisis is historic – the worst fall in living standards in over a century. Equally, the public debt position is at levels once deemed unaffordable – so a spending splurge won’t be viewed favourably by the markets. Commentators also expressed a view that, unfortunately, Truss isn’t the strongest communicator. As such there is a sense that investors, both foreign and domestic, may shake their collective heads after her grace period is up. Either way, the clock is ticking, and sterling will likely come under pressure if Truss fails to deliver a competent and believable vision for the UK economy.

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