Politics Trumps Economics

By Shlomo Maital    




     Sorry for the awful play on words but —   once again we learn that politics drives (Trumps) economics.

   McKinsey Global Research does a global survey of ‘experts’ (mostly senior managers) to survey perceptions of global risk. For some reason, I get to respond as well.

   Here are the results of the latest survey.

   Worldwide, four of the five top global risks are related to politics: transition of leadership, changes in trade policy (which are highly politicized, viz. Trump’s new tariffs on Canadian imports), geopolitical instability and domestic political conflicts. Asset bubbles are #3, but fall well behind the two key sources of political instability.

      Trump’s footprint is seen in the risks for North America, 52% see domestic political conflicts as by far the main source. In contrast, for Latin America, it is the transition of political leaders that is most worrisome.

       Developing markets are most concerned with asset bubbles, fed by massive credit expansion, especially in China.   Eight years after the global crisis, asset bubbles are back.

       What this means for all of us, especially global managrs but not only they:   We all need to track political currents and events closely, because they drive asset prices and the economy.

     Politics trumps economics. And when you capitalize Trump – you get a quirky, narcissistic and utterly unpredictable egotistical leader who can and does and say almost anything.