Populism and your portfolio
Let me reassure readers, this is not yet another article on Brexit, although some of the more pessimistic narratives employed by the Remain side are central. Rather, the focus is on underlying forces of populism which have found their expression in the UK’s vote to leave the European Union and are observed in various guises around the world. Most notable is the spectacle of Donald Trump running for American president and there is also a prominent coterie of reactionary parties (too significant to be dismissed as mere protest movements) in France, Austria, Italy and the Netherlands.
In our office building, shared with the staunchly pro-EU Financial Times, there was a palpable sense of disbelief, dismay and even anger the day of the UK result. Our sister publication has since been attacked by those in the right-wing press who are galled by the FT’s “Remain continuity campaign” – reporting that is supposedly overly negative about Britain’s prospects outside the European bloc. The FT has also been a vocal critic of Trump; in part justifiably given some of his unpleasant xenophobic, Islamophobic and chauvinistic utterances. While many of a liberal mind-set feel an instinctive revulsion to aspects of Trump’s rhetoric, the idea ordinary people have been left behind is less controversial. Increasingly, as the political focus of the Financial Times reflects, those at the head of supranational government and financial institutions – who have driven and profited most from globalisation - are now fearful of the populist backlash.
At Investors Chronicle we strive to be apolitical in our outlook but it is only circumspect to examine some of the ugly scenarios should an economic fallout from populism come to pass. Recently, as part of their global stress test series, index provider MSCI took a detailed look at populist movements and potential negative consequences for investors and we explore portfolio allocations to be ready for political uncertainty.