When a cult rules millions

For most of my working life, I have been able to tell those who asked me that politics made not much immediate difference to investment markets.  Of course, where politicians make significant changes to macro-economic conditions (say Reagan and Thatcher in the ‘80s under the influence of the monetarists and market liberalists), there will be impacts over the medium to long term. 

However, as a rule markets have always taken the view that in the democratic ‘free’ world, politicians come and go and policies oscillate from a bit leftish to a bit rightish with the odd major annoying upset, like Brexit.

It is also widely understood that the most important capitalist economy, the USA, is really under the control of two main groups – a loose collective of shadowy billionaire oligarchs and the lobbying firms employed by the mega corporations.  This was explained to me when I was a teenager attending college to study business and as a Brit, I struggled to believe it, but now there is some evidence (especially during the Boris Johnson period) that the same sort of democratic corrosion is occurring in the UK.

The people with the real power in the USA welcomed Trump’s re-election and the US equity market performed accordingly early this year.  Here was a man who was not very bright, had only made money with the help of Russian property developers or by blatantly disreputable behaviour, when left to his own devices went bankrupt over and over again, had an ego that forever needed massaging, and was utterly free of the ethics that most people think define Christian societies. 

In essence, they thought that they knew, as the KGB had discovered much earlier, that this was a man whom you could easily manipulate with a little forethought.

That was however their mistake.