Early this year (23rd Jan) we suggested “politics is likely to prove an increasingly important determinant of relative performance across asset classes, sectors and regions”. Indeed, as it relates to the US, we later commented (18th April) that “it’s started to look like President Trump will struggle to generate any real change domestically…the US President might switch his attention to geopolitics.”
With respect to the first statement, we have probably not yet been proved accurate; overall global growth momentum has continued to float almost all boats. Nonetheless, there is still notable political risk. For example:
With respect to the second statement, on Tuesday, Trump broke the market from its summer slumber by stating the US would “deploy fire and fury like the world has never seen” if North Korea did not give up its nuclear programme. Two days later, he added that he “may not have been tough enough”. North Korea responded by announcing it was planning to target the waters surrounding the US territory of Guam with 4 missiles by “mid-August”. The US’ top military official (Chairman of the Joint Chiefs of Staff General Joseph. Dunford) is scheduled to meet with the leaders of US Forces Korea and the South Korean President Moon Jae-in later today.
Trump also set his sights on Venezuela, commenting “The people are suffering and they are dying. We have many options for Venezuela including a possible military option if necessary.”
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