The problem I currently face is that politics and markets are so intertwined, that one has to learn everything about politics to know how the markets will behave !
So here’s another dose of my thoughts into an unlikely and low probablisitic outcome, however, a positive one !
As much as I don’t like labels; -ist or -ism, l would like to share, how I think the current circumstances will further transpire.
Looking at the Eurozone, UK and the US and the myriad factors surrounding them.
The current wealth gap, the rising populism of the left and the right, the broadly loose monetary policy with limited tools to further avoid a recession. The skewed distribution of money, high budget deficits and huge central bank balance sheets. To save myself some time you can read this article here by Ray Dalio : The World Has Gone Mad and the System Is Broken
No one’s an expert in timing the market so I can’t say whether this will transpire in these coming 2020 US elections or 2024. Similar situation with the UK, although it’s a short waiting time to know where we are headed in 2020 (at least for the foreseeable future). The political situation in these major developed economies is shouting for a shift towards social welfare policies/left wing policies to take over. For the foreseeable future, these governments will be very effective in boosting productivity, sustaining the expansion, keeping inflation at the right target. Returning the economy back to fundamental drivers of growth and productivity. Perhaps until, billion dollar businesses and high bracket taxpayers move away to safe havens (for which rules and regulations could be enacted to make it a little difficult and have them contribute towards sustaining the current economic cycle). Christine Lagarde’s appeal to government and fiscal policies to take centre stage is foreshadowing the events to transpire.
Think of it this way, the current manifestos by Labour in UK and Democrats in US, which business sectors are they going to affect ! What sort of resource allocation rotation take place to kick start these government spending? Which other companies will benefit from it? What sort of innovation and R&D will take centre stage? The climate tackling policies, conservation, renewable energy projects will give birth to new companies, drive up productivity. The idea of climate change and, the reason I am stressing that it will drive productivity is that, it is deeply rooted in the minds of proletariats. With the like minded people in authority, the common peoples’ interest can be aroused and fueled to drive up productivity and growth.
Given that these parties fulfill their promises on fixing the healthcare, pension and minimum living wage to up the living standards. Given also that, the education system is reformed, properly funded. The next decade can look to be a brighter one too. If done right, the budget deficits can be kept under check too. The promised infrastructure spending will create jobs, opportunities and lay the basis for restructuring the country, its resource distribution
I am not saying that it will turn into a perfect happy world, as each system has its flaws, side effects and faults. If freedom of speech and platform for difficult debates can be provided a lot of these faults can be minimised. If the current 1% are given the adequate incentives, retained and taken help from to drive this new paradigm forward. We may just be able to avoid internal and external conflicts, sustain the globalised world and keep the supply chains in motion.
Would I call this my view ? No, it’s more of a one of the possible scenarios that can happen. Given it does in these coming elections on both sides of the pond.
P.S. Some of my thoughts may have been biased from this video clip !
Macro Passions 