Back in May, Muckler looked at The New Rule of Financial Self Reliance and the populist uprisings across France, Spain, Portugal and Italy as previous financial certainties were systematically removed by cash strapped administrations.

In the UK, faced with a pension deficit nudging £1 trillion, former Pensions Minister Baroness Altmann warned that those looking forward to the ‘guaranteed’ terms of their final salary scheme, may have to compromise lest the whole shebang should come a tumblin’ down.

However, even Muckler hadn’t reckoned on the seismic events that played out over the rest of 2016 and despite the fact that markets have remained remarkably strong in the face of what they hate more than anything – uncertainty – 2017 is sure to deliver plenty of twists and terms as the new economic, social and political world becomes a reality.

Among the risks of plebiscites such as the UK’s EU Referendum is that, since they give one vote to every eligible voter without regard to constituency splits which arise in the UK’s ‘first-past-the-post’ style of election, the result is direct and the issue supposedly being voted on can be obscured by any other considerations that voters may wish to express.

How seriously voters considered the merits of EU membership before voting may never be known. However, some political observers sense that to a significant degree the vote was hijacked by a widespread disaffection with a status quo from which many voters felt they had become disenfranchised and left behind by the effects of globalisation. Whatever the reasons, politics is being changed by a slow burn revolution under the banner of‘Populism’.

‘the vote was hijacked by a widespread disaffection’

This same rationale has since been attributed to Donald Trump’s unexpected victory as an underlying dissatisfaction among some sections of society came to the surface. Interestingly, the Trump win came through a normal election process, much of which involved a ‘first-past-the post’ process.

Subsequent assessment has suggested that the Trump campaign team adopted ‘Moneyball’-type big data analysis to better identify voting inclinations and so gamed the election more effectively than their Democrat Party rivals. Yet again, the polls of voting intentions were found wanting.

The latest political event of note has been the Italian Referendum which sought permission to implement far-reaching constitutional reform.

In the event, it was taken as an opportunity for almost 60% of the voters to express a judgement on the government rather than national reform.

The vacuum following Prime Minister Renzi’s resulting resignation leaves plenty of room to reflect on the current trend in democracy in action – whether it is through referendums providing answers to questions other than those intended or higher levels of tactical voting or voter-targeting in traditional elections.

‘plenty of room to reflect on the current trend in democracy in action’

It should be noted that markets have shown an increasing resilience to recent ‘shocks’ – bouncing back quickly after initial sell-offs. It has been suggested that investors are becoming inured and simply buying on any weakness.

However, all of the recent ‘big events’ – the Brexit vote, the Trump election win and the Italian referendum – carry some profound implications which are likely to surface in the longer term.

Perversely, the almost surreally calm short term reaction to events could be carrying an unresolved unease among investors into the future. Undoubtedly, some of the market movements will have been exaggerated by speculative shorting and subsequent shortcovering.

An awareness of the political dimension has become more critical in assessing prospects for markets, given the increasingly extreme range of policies under consideration.

The situation in the United States is a case in point where it is far from clear which policies will be adopted, regardless of the intentions flagged up in the run-up to the Election.

The result in the Italian referendum has intensified the focus on the prospects for France’s Presidential election in April 2017 and Germany’s General election in September.

‘the almost surreally calm short term reaction to events could be carrying an unresolved unease among investors into the future’

In the absence of adequate restructuring in the Eurozone economies, European Central Bank President Mario Draghi has been obliged to extend his programme of Quantitative Easing, albeit at a reduced monthly rate of Euro 60 Billion, to the end of 2017 and maybe beyond.

Meanwhile, the UK Supreme Court is to announce in January its ruling on the legal challenge to the right of the UK Government to trigger Article 50 – the prelude to about two years of negotiations for the UK to leave the European Union – without further reference to Parliament.

The outcome of this complex constitutional issue is keenly awaited and, despite the intervening agreement by the Conservative Government to refer the terms of negotiation to Parliament, it could yet force the Prime Minister Theresa May to resort to a General Election.

While Mrs May has declared her intention to trigger Article 50 by the end of March 2017, the timetable is beginning to look at extreme threat from new hurdles and delays. Even now, there seems to exist an outside chance that Article 50 will never be triggered.

Perhaps, UK voters will reach a point of exhaustion, having long forgotten what the original decision was and why – a sort of ‘Brexit fatigue’. The reshuffling of the political pack that a General Election could bring might favour a widely-perceived bias in Parliament to remain in the EU, counter to the wishes of some Members’ of Parliament constituencies.


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