The win by Donald Trump to become the next US president alongside a Republican controlled Congress could be “worse than Brexit” for financial markets, even if the worst symptoms may take some time to appear.
That is the warning from Pär Magnusson, analyst at Swedbank, who is reported by local financial daily Dagens Industri to have sent a strategy note to clients, outlining his concerns.
The challenge is linked to the geopolitical expectations that are now being raised, such as the possibility that a Trump win also makes it much more likely that politicians such as Marine Le Pen in France and Geert Wilders in the Netherlands could obtain the support necessary to implement radical policy changes in those countries – amidst a general backlash against the prevailing political order in the West.
What Trump has shown is that it is no longer enough to rely on a combination of opinion polls, the older political establishment and financial markets, which collectively seem to have underestimated the strength of populist power, Magnusson suggests. Fear of populism may lead, for example, to spreads on eurozone government bonds widening.
In Sweden itself, the Sweden Democrats party, the third largest in parliament by seats, and its leader Jimmie Åkesson, have often been placed in the same populist category as Le Pen’s Front National and Wilders’ Party for Freedom. Although Åkesson has reacted with mixed messages on the Trump victory, he also is reported as not being surpised, according to Swedish newspaper Dagens Nyheter. It is also the case that the SD party has been kept out of government in Sweden by an uneasy agreement between the ruling coalition and other opposition parties, which could be challenged by the implications of populist power at the ballot box.
Despite the longer term concerns, the OMX30 index of key stocks traded on the Stockholm stock exchange was up about 0.6% in late afternoon trading on 9 November.