Voters seem to be seeking politicians who offer pragmatic solutions to the complex problems of the day rather than simplistic recipes. The next U.S. president, I dare predict, is quite likely to be an avowed centrist as well. Maybe the disillusionment with radicalism – in this case of a truly brutal nature – will even strengthen forces of compromise in the Middle East at some point in the not-too-distant future.
All in all, fears of significant political destabilization and systemic disruptions thus seem overdone, which may be one reason why markets, equities in particular, have been so stable and calm until recently despite rather stretched valuations. Does this mean that we will, after all, experience the unabashed victory of economic and political liberalism that Francis Fukuyama proclaimed? This remains rather unlikely, in my view, for three reasons: First, our multipolar world suggests that national and regional interests will take precedence over those promoting free markets and unfettered globalization. Second, distrust of market solutions has not been overcome, not least due to the “misdeeds” during the financial crisis.
Third, aging societies (the “silver economy”) are unlikely to turn toward significant liberalization and reform, not least given that many of the key economic problems of the day would require a reallocation of resources between the older and the younger generations. The political models we are heading for are thus more likely going to be various forms of, more or less, liberal social democracy. From an investor point of view, these are certainly much preferred to either right or leftist forms of radical populism. At the same time, hopes for vigorous liberalizing reforms are probably misplaced.
Michael Strobaek is the global chief investment officer at Credit Suisse.
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