The post-Covid unknowns that could rock marketsPublished on 03 Jun 2021
Investors must prepare for change at every turn
With the vaccine programme now well underway, people, in some areas at least, are looking forward to a return to a much-vaunted ‘new normal’. As much as this new stability is welcome, things are still changing. We have little idea, really, what this time next year might look like. Indeed, change, may well be the only thing we can rely on in the future.
For politics and policy, the changes between the pre- and post-Covid world have been truly immense. Before the crisis, markets were broadly governed by fiscal discipline and financial stability, along with globalisation and free trade – the key drivers of the post-war world.
By April 2020, however, this had turned full circle. As societies gave up many of their liberties and welcomed in a new era of authoritarian state control, they started to look to policy makers and not free markets to solve the crisis.
On one level, this has meant that established post-war policy orthodoxy – controls around money supply, debt and deficits, inflation targets and the like – has been thrown out of the window in an effort to get us through the crisis in pursuit of normality and growth. It has resulted in a sort of new free-form policy, some of it made up as we went along.
This has been accompanied by the acceleration of a new age of political impunity – a worrying global trend whereby those in charge believe they can get away with anything, whatever the prevailing rules and attitudes around in the world.
Around the world, there are pockets of ‘anything goes’, where governments act as they will without sanction or challenge. Ultimately, this environment is providing the mood music for more risks of geopolitical conflict particularly between the US and China, but elsewhere too. It will have a huge impact on politics, economics and financial markets for years to come.
It is against this backdrop, where change is unpredictable, that the possibility of some unknown unknown opens up: one which we can’t quite put our finger on now, but when it happens, we will certainly know about it. And unlike the vaccine, it is really going to hurt.
Graham Wainer is CEO and Head of Investments at Stonehage Fleming Investment Management. He is also Chairman of the CIO Group.
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