Kim Jung-Un calls Donald Trump ‘old’.
Trump tweets back that Un is ‘short and fat’.
This exchange over the weekend marks a low point in what has been a pretty low year for politics.
Western politics in particular.
We can’t crow too loudly. Australian politics isn’t faring much better.
What with the citizenship dramas of our elected officials and the poor handling of the Manus Island detainees.
Last week’s cringeworthy Turnbull ‘selfie’ with Presidents Trump and Xi topped off our national embarrassment. Eddie McGuire correctly stated on morning radio today that Turnbull looked like ‘a flog’.
Like I said, western democracies are in a pretty bad place right now.
The UK is dealing with Brexit, and MP sex scandals. Nothing new there, mind you.
Spain is dealing with Catalonian secessionists.
And the European Union moves one step closer to obliteration with every national election in a member country.
It’s worrying times.
Or so you would think…
There’s one group of people who are clearly not worried.
Not worried at all…
Markets are running hot
In this toxic political climate, investors have never been more jubilant.
All around the world, shareholders are making hay.
US markets are at record highs, the European STOXX 600 index is at its highest point since 2015, the majority of Asian indexes are close to 10-year highs, industrial metals like Nickel and copper are on the up…
Even the Australian market looks set to finally join the party, with a move over the key 6,000 level last week.
Masaaki Yamaguchi, an equity market strategist at Nomura Holdings Inc. in Tokyo:
‘Investors are gaining confidence as the global economy is solid. Not only exporters but also domestic-demand-oriented companies are improving earnings. Business confidence and corporate earnings are good in the U.S., and business sentiment is improving globally. Stocks are inclined to rebound, with a series of good earnings results. There’s more room for high-tech related shares to rise.’
Emerging economies are going well, too.
India’s benchmark equity indices climbed to fresh records after a World Bank report showed it’s easier to do business in the nation.
The S&P BSE Sensex rose 1.2% to 33,600.27 while the NSE Nifty 50 Index jumped 1% in Mumbai.
The country under Prime Minister Modi has been pushing a ‘Make in India’ campaign to encourage foreign companies to invest in the country. Companies like Apple [NASDAQ:AAPL] are in negotiations.
Incidentally, I think the rise of India could be a very profitable trend to watch in 2018. Especially for Australian resource investors.
But in the strange political environment, what’s going on here?
Are investors delusional? Are they simply wilfully ignoring the political situation?
Or is it the case that we’ve entered some post-political globalised world? A place where individual politicians, despite their noise, can’t actually change that much?
And maybe the fact politics can’t change anything is seen as a positive by the markets?
Ignore the noise, invest with the trend
To be honest I don’t know.
But I do know that as an investor, it pays to invest with the trend. And that trend is clearly on the up.
For now, at least.
Of course, I’d still be keeping an eye on the political situation. Situations like Brexit will cause short term volatility, when their economic realities set in.
And President Trump is always capable of throwing a curveball or two into the mix. But so far, he’s been all hot air. Not one single piece of important legislation has been passed in his first year.
From an Australian perspective, the current political malaise is worrying.
Despite the need to modernise the wheels of the economy, deal with long-term structural budget imbalances and sort out unfeasibly high property prices, it seems the lack of political will means nothing will happen.
Unfortunately, I think it will take a crisis for our politicians to deal with these issues.
And I’m not sure the current political class would be up to the challenge, even then.
But for now, as Citigroup’s CEO Chuck Prince said in 2007, ‘As long as the music is playing you’ve got to dance.’
I’d agree with this sentiment right now. It’s time to stop worrying and start investing. But just make sure you’ve got a seat ready for when the music stops…
Editor, Money Morning