For Geneva based company Decalia Asset Management, UK elections have shown populists have a supportive electorate in large countries and that unorthodox candidates are underestimated by experts.
There is far more to Boris Johnson and Donald Trump than their bouffant blonde hairstyles. This article’s attention-grabbing title is meant as a warning: don’t underestimate the colorful political figures currently gaining traction around the world.
They are buoyed by a powerful wave of deep frustration with globalisation among the working and middle classes in the Western world.
The UK’s recent vote to leave the EU was not just about Europe, but was motivated also by ordinary people’s reaction to an increasingly globalised world.
Breaking down the UK vote by education, social class, age, and location shows that the poorer, older, and more distant from the center (i.e. rural) you are, the more likely you were to vote against remaining in the EU, regardless of the candidates’ rhetoric.
Those were the factors influencing voters’ cost/benefit analysis with regard to globalization. Many find the opportunity to work abroad not particularly attractive, nor are they swayed by the advantage of cheap foreign goods.
Conversely, they care about their communities, and worry about the effect of multiculturalism on them.
The Brexit surprised both markets and experts. They tried to rationalize the vote as an EU issue, when in fact it shows that rising income concentration has enabled popular resentment of globalisation to rise up to the urban middle class.
In the US in particular, the spike in mortality rates among older, poorly educated whites, both men and women, suggests they have lost hope, resulting in self-destructive behaviors.
This trend should serve as a warning for countries whose presidential elections depend on such decisive swing voters, namely the US and France.
The possibility that Donald Trump will become the next US president cannot be ruled out, nor should one discount the appeal of a blonde populist in France next year.
We don’t encourage investors to bet on such binary events: predicting election outcomes or the immediate consequences of the Brexit involves too much randomness.
As long-term investors, we prefer to focus on mitigating the political risks contaminating many advanced economies. For us, this means focusing on country and currency diversification.
In the 1970s already, Switzerland and the franc were the ultimate refuge; they may end up playing this role again sooner than later.