Making money: populism and investment
A new portfolio
Every time a “populist” political movement gets close to a whiff of power, the same warnings are wheeled out by fund managers, said Matthew Lynn in The Daily Telegraph: “sell while you still can”. The “Trump Bump” and “Brexit Bounce” have given the lie to that. And they’re not the only ones. Poland is “veering off to the populist Right”, yet the Warsaw index is “doing great”. So are Hungarian equities, despite the “nationalist posturing” of PM Viktor Orbán. “As populists come to power, there is always a dip in the markets – and the only lesson is to buy the shares.” A “populist portfolio” now would comprise the US, UK, Poland and Hungary; next year, maybe, the Netherlands and France. “True, you might have to hold your nose as you put in the buy orders. But it will almost certainly outperform any other investment you might make this year.”
Get real about Trump
I doubt it, said Richard Beales on Reuters Breakingviews. When it comes to the Trump rally, “investors need to get real”. Witness the sell-off this week following the sweeping executive order on immigration. Ray Dalio, boss of the hedge fund giant Bridgewater, wrote in December about the possibility of Trump’s policies igniting “animal spirits”, and creating “a virtuous cycle” of investment and returns. His caveat was to question “whether this administration will be a) aggressive and thoughtful or b) aggressive and reckless”. By now, investors should be starting to arrive at an answer.
Guessing game
Should investors run for the hills in fear of 1930s-style protectionism, or hang around to enjoy the possible fruits of tax cuts and massive infrastructure spending? “Each twitch in the stock market is taken as support for one side of the argument or the other,” said Nils Pratley in The Guardian. It’s “a great guessing game”, but the investment implications are “clear as mud”. If there is a rough consensus, it’s that a big US fiscal stimulus will “eventually encounter the stiff breezes of a strong dollar and higher interest rates”, and that there is a serious risk of a bust if Trumpist protectionism becomes truly heavy. “That extremely loose working theory seems as good as any.”