Ignore the Newspapers: Read the Markets

05.01.2017 • The Economy

Ankit Shah – Moneyweek Magazine (Great Britain) –

Could 2017 finally see the collapse of Europe? Or have we already passed peak-populism? Could we see a war between the US and China? John Stepek chairs our Roundtable discussion.

John Stepek: What was the single most significant event of 2016 for investors?

Steve Russell: The election of Donald Trump. But Trump was just part of a shift towards populism in politics, one that started with the Brexit vote. That’s important for investors because it heralds a regime change. For the last decade, central banks have been all that matters – Federal Reserve boss Janet Yellen, her predecessor, Ben Bernanke, and the rest have been the global superstars of investing.

Now politics is taking centre stage. People feel that the financial crisis has impoverished them and that things aren’t getting better, and Brexit and Trump are just manifestations of this anger. That has significant ramifications for investment strategies. It doesn’t so much change the path we’re on, as accelerate the move towards fiscal intervention and inflation.

John: Is this the high-water mark for populism?

Steve: No, it’s unlikely to stop at the UK and US. Europe is the obvious next candidate. It doesn’t take someone like Marine le Pen winning an election – you don’t even have to change government. What matters is that even mainstream politicians like Theresa May are forced onto this populist ground and into doing fiscal intervention to pacify voters.

Paul Hodges: I absolutely agree. If you look at the latest polls, around two-thirds of voters in the major economies believe their country is going in the wrong direction. Given the upcoming elections in Europe – the Netherlands, France, Germany – that’s very important for investors.

-Read more at orders.moneyweek.com-

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