Political uncertainty continues to undermine sentiment and as we move through 2019, the theme of populism is likely to appear many times. We have seen through the elections in 2018, in Italy and Brazil for example, that politicians from outside of the mainstream making promises of “better times” to their electorates are able to secure election wins. That said, the realities of office can act as a constraint of sorts, as we have seen in Italy. President Trump may also find his ability to enact policy change limited by the recent shift in the makeup of Congress. With the Democrats now in control of the House, Trump will no longer be able to push through policies such as his $1trillion tax cut or potentially even get his border wall funded.
2019 is relatively light in terms of elections that are scheduled, but elections in Greece, Belgium and Portugal, as well as European Parliamentary elections, will serve to remind us of the rise in populist parties. Further afield, elections in Argentina, India and South Africa will be a stiff test for the incumbent leadership as all three countries face varying headwinds.
In terms of geopolitics, we have written at length over the course of 2018 of a theme we expect to be around for some time – the incumbent superpower (the US) facing up to an ambitious rising power (China). This rivalry goes well beyond a trade war and as long as Trump is in the White House, we are likely to see tensions between the two powers rise. Geopolitical risks remain elevated, with an almost permanent threat of instability in the Middle East, heightened by the current US administration’s desire to see Iran’s power diminish.
We should also not ignore President Trump’s legal issues at home, which once again appear to be building, and whilst impeachment still seems a long way off, it cannot be fully discounted. For all his actions, Trump has been a ‘market friendly’ president and any uncertainty will unsettle US markets. He will continue to seek to deflect attention from the Robert Mueller investigation (and others) by any means possible.