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16th January 2017
The Times They Are A Changin'

the times they are a changin

2016 marks the year that Bob Dylan won the Nobel Prize for Literature. The third verse of an especially poetic song of his seems relevant for the political world we appear to be living in.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside and it is ragin'
It'll soon shake your windows and rattle your walls
For the times they are a-changin'.
-Bob Dylan

I think this verse sums up the American political mood quite well, along with the referendum disposition by the UK public and the swathe of anti-establishment feeling across the European Union.

Certain portions of society are unhappy. Over the last forty years we have seen globalization, free trade, immigration, mechanization and technology completely change the world that we live in. For many, this has led to a dramatic improvement in the quality of life, but to the man with the new found voice, it has led to actual or perceived hardship. Forty years ago, a blue-collar worker could earn a decent living. But the rise of automation, technology, and globalization, has seen jobs being lost to machines or foreign climes. This long term structural change in the global economy has been exacerbated by the Global Financial Crisis, where large portions of society (lacking in assets) have seen their purchasing power eroded by poor wage growth, low, but persistent inflation and house price increases forcing up rents. They’re angry. And they’ve been angered not only by the problems themselves, but also by the lack of resolution.

Most Western political systems can be a quagmire for policy changes and trying to get things done. Too often, Punch and Judy politics obstructs any form of change, with the opposing side often disagreeing with something just for the sake of it. Maybe that’s me being overly cynical. But this perceived or actual obstruction angers people. It is the sign of a good democracy to have robust debate and a strong opposition, but often it just feels like childish squabbling. The American population clearly agrees with Dylan: ‘Don’t stand in the doorway, Don’t block up the hall, For he that gets hurt, Will be he who has stalled’. A little more cooperation within politics might actually start leading to tangible changes and improving the public’s perception of our politicians; neither of which would be a bad thing.

People voted for Trump because they wanted change. For whatever reason, they felt let down by the established political classes and saw the message of change as an appealing alternative to the status quo. Whether he is the right man for the job is a separate debate, but the people who voted for him feel like they have a better chance of changing the system with him than with Clinton. People voted to leave the European Union for very similar reasons: anger at the world they live in, with nobody listening to them, and nobody changing things. Was the European Union the sole cause of all the woes of UK voters? Was it the modern day equivalent of Pandora’s box? No. It was not perfect, and it did not suit everybody. But ultimately, it was just the most tangible entity to lash out at.

Our politicians do need to heed the call of the dissatisfied public. If not, there will be more political shocks and the system will become more and more unjust for the majority.

So far, markets have been remarkably sanguine about a Trump presidency. The initial shock and fall, which has become all too common in markets, was short and shallow. A starting 160 point decline in the UK was reversed and now the market is back above 7000. This does seem quite peculiar given the fact that not many people were expecting a Republican win and still nobody knows what it means (sound familiar to something else?). The list of global concerns that I bore people with has now gotten slightly larger, and our eyes are firmly fixed on how these developments will continue to evolve in 2017.

Whilst remaining cautious on the future direction of markets, we are still looking to take advantage of irrationality and fear to buy into good quality companies and funds that should deliver meaningful growth over the longer term. Our job as stewards of your capital remains at the forefront of our minds and we are well prepared to navigate the battle outside that’s ragin’.