By: John Redwood
May 16, 2018
A paradox stalks modern markets. Many professional investors tell us that they do not like the results of most recent elections, though they would – I am sure – also tell us they think democracy is the best system of government. Their dislike of President Trump has not stopped them bidding US shares up to new highs.
Investors are rightly wary of authoritarian regimes and single-party states, and usually apply a discount to the shares in these markets. Such arrangements, after all, make good company governance more difficult and fail to expose government decisions to sufficient criticism to try to improve the quality of those choices. In some cases, dictators corrupt private-sector companies operating in their territories, or subject them to policy changes that do not respect property rights.
In the last few years, many market people have also expressed their dislike of President Trump, of Brexit, of the two winning parties in the Italian General election, of Syriza when it won the first time in Greece and of Geert Wilders Party for Freedom, which was the top performing of the many Dutch parties. This also applies to the governments of Poland and Hungary, and of some of the populist parties in Spain. They lump them altogether, call them populist, and argue against their words and deeds.