Failure to live up to these promises due to a lack of political clout would spook markets, with the possibility of a government shutdown spelling big problems for those invested in the US economy.
An analysis of a shutdown in Washington DC in 2013 by Standard & Poors found $24bn left the economy during the 16-day stalemate, the repercussions now would be difficult to forecast, but the threat of a sharp market correction in the event is one investors shouldn’t ignore.
While unshackled by the same checks and balances as the US legislature, the pressure on May’s UK government to get the Brexit deal right and get the economy moving for everyone has already put pressure on business investment.
A lack of faith in a nation’s leader is often a direct judgement on how successful a country can be as a whole, and rock bottom approval ratings do not paint a rosy picture of a happy and content nation.
In a recent note, Omnis Investment’s Tori Meadows says: “While the wave of political ‘populism’ that shaped 2016 may be beginning to recede, the mood of discontent in our major economies remains, and this could potentially weigh on markets as we move into the autumn.”
Markets have continued to rise as more and more people look to cash in on high equity prices in a world of rock bottom interest rates and dismal fixed income returns, and this unease around our political leaders could prove to be a bigger problem than first thought.
While populism appears to have abated, is it a case of just for now? Either way, political leaders should be wary, and perhaps start planning a few more photo calls to kiss a couple of babies’ heads. Anything to boost those ratings.
