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Matthias Knab, Opalesque: AB (AllianceBernstein L.P.) writes on Harvest Exchange:
Economic insecurity, social insecurity and political ineffectiveness: these developments have fed a resurgence of populist policies in many regions of the world. We think there's potential for major impacts on global capital markets.
We expect to take aim at areas such as trade protection, immigration, higher taxes on corporations and high-income earners, and big wage increases. All these policies tend to be inflationary, so it's likely that populism will boost inflation rates over the medium to long term.
But that's only one impact we see-investors can expect populist dynamics to have five major influences on their strategies:
1) A SECULAR INCREASE IN INFLATION. A greater willingness to use fiscal stimulus alone has the potential to lift inflation, particularly because central banks are likely to keep interest rates low to ease the process. Against this background, populism could make a stronger political case for aggressively pursuing growth, which would increase inflationary pressures.
2) DOMESTIC FACTORS WILL BECOME MORE IMPORTANT. Policies that "raise the drawbridge" by attempting to counter global trade patterns will bring national factors to the forefront. Not all countries will embrace populism-at least not to the same degree. So, we...................... To view our full article Click here
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