4th November, 2016
Some Pre-US Election Thoughts…
At 25 years old, I can hardly speak with a wealth of experience, but nonetheless, I have never seen a country more divided and angry than today’s America. The build-up is toxic, the TV debates laughable, and the politics… well to be fair, it’s just normal politics. Irrespective of your view on his windswept hair style, you have to ask yourself, if Donald Trump is the answer, what on earth is the question?
For many voters, it is not a choice between good and evil, but between bad or worse. They live in a world where every month a new app revolutionises the way a certain industry works. “Uber” for example, now operates the majority of the New York cab market. Anyone with a car and some fuel can chauffer people around. If Del Boy was still around, “Trotters Independent Taxi’s” would already be centre stage. The point is that what was once a secure full-time profession, is now extremely competitive and probably less lucrative. This exerts pressure on the incomes of working people, and all the while financial markets move higher, helping the rich (who own financial assets, like top wall street CEOs) get richer, and the poor who depend on wages, become more insecure.
Of course, technology is just only one factor. In reality, there are a plethora of interconnected issues that are increasing the inequality gap. But the emotions people feel are real, and they are bubbling over into the US political backdrop. I don’t for one second believe that many US citizens would vote for the Mexican wall in isolation, but just like Brexit, this is a vote for change.
The Italian political position hasn’t received one tenth of the global coverage of the Trump mutiny, although its arguably more important to you and I. On December 4th, Italy will vote on some constitutional changes proposed by Prime Minister Renzi. The ins and the outs of the changes are far less important than the effects of this year’s wheat harvest on the quality of pizza dough, but a vote against proposals will probably lead to his resignation. That means another general election, and with Eurosceptic parties primed and ready, the possibility of an “Itexit” vote (hasn’t quite got the same flow has it) may not be far around the corner.
Again though, support for these parties does not come out of nowhere – the same trends persist. Having said that, I haven’t seen an app that trains you as a pizza chef yet… maybe I should speak to Lord Sugar?
Waiting until early 2017 to trigger Article 50 could be a very shrewd move then. One thing’s for sure, any further political instability in Europe isn’t going to harm our negotiation stance. Brussels will push its shoulders back and puff its chest out for now, but then we are currently the only one. With Holland, France and Germany all due to vote in 2017, it is probably wise to see where that takes us.
In the meantime, all eyes continue to point to what makes the front page of the papers; the controversial personalities that make the Trump vs Clinton debate so fascinating. If the polls are anything to go by (and if we’ve learnt from Brexit, they’re not), the US will probably have its first female president. That would usher in a period of more of the same; a better outcome for financial markets in the short-term, but it’s really just a plaster, not a long term fix.
There is of course, more to investing than politics. With any of these uncertain binary events, the best decision is to bet on neither outcome. A short-term market reaction can produce an opportunity, so for once being reactive can “trump” (get it?) being proactive. Often though, the things you pay least attention to, have the most effect. A risk is unlikely to be a risk if everyone is concerned about it. By definition, it’s the ones you don’t see that surprise you.