Waiting in the departure lounge

Guy Stephens is technical investment director at Rowan Dartington.
As we enter the last quarter of 2017, it is fair to say that much of the anticipated political disruption to markets has failed to materialise. 

We have had political change but much has either been stifled (Trump), delayed for the foreseeable future (Europe), or encountered unanticipated apathy (UK).

What we saw in Catalonia over the weekend was quite shocking, with rebellious faux-democracy clashing with state enforcement; this will only add fuel to the fire. It was yet more evidence that much of the general population in the developed world is unhappy with their current political system. 

This is one direct consequence of quantitative easing, which may have saved the global banking system and benefitted those with investible assets, but it has failed to help the majority of the population: the average earning, hard-working voters. 

As the Tories conduct their party conference this week, they should be really worried. Jeremy Corbyn had a triumphant conference and is engaging with the young electorate. His ideas and policies may seem to be a step back to the dark days of the 70s, but the reality is that much of what he says appeals to a majority of voters.

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Indeed, this is the key point: the centre of political gravity has moved towards the left, towards the people and away from the elite. Corbyn offers hope and an ideology which appeals to the masses; those who have seen the gap between the wealthy and less well-off widen considerably, and for those who feel relatively impoverished. He presents an appealing prospect – one which is radical but refreshing. 

The Tories’ mantra is simply one of capitalism and economics, as it has been for many years. However, this bypasses the social requirements of society's majority. Whether the party remains with Theresa May or changes leader hardly seems to matter, as they embody all that is alienating voters. Career politicians selected from the elite are out of touch with the vast majority of the population. The contrast with Corbyn et al is stark; he is believable and honest compared to a PR veneer over whatever lies beneath. 

Newly elected French President Macron is fast losing popularity as he tries to implement his social reforms, similar to his predecessor. Chancellor Merkel has learnt just how much voters disliked her immigration policy, which has led to a rise in nationalism; however, a stable and workable coalition does now seem certain.

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Trump's supporters remain loyal, despite a Presidency full of U-turns. His shortcomings are obvious but how he appeared in the campaign trail was what he is, and that clearly appeals. His tweets are often outrageous, clumsy and divisive, but they bypass any spin machine, forging a direct relationship with the reader, in liking or loathing. He is inconsistent, contradicts himself, and has clearly shown bias in favour of the extreme right. It is alarming that decades of progress in race relations can potentially be pushed back so easily. 

As investors, we need to seriously consider the implications of a Labour government in the U.K. and stop believing this is still a distant dream or nightmare. Financial services practitioners and their wealthy clients have done very well out of quantitative easing and need to consider this carefully. 

There is real purpose behind Jeremy Corbyn and it is connecting with the majority of disaffected voters. Meanwhile, the Tories have a lame duck leader and leadership plots galore. They are fighting a rear guard action, constantly on the back foot, and their policy is being dictated by others. Observe the efforts Theresa May has gone to over Bombardier, raising it with Trudeau and Trump, even threatening reciprocal action. Could this by chance be connected to the DUP support in Parliament? We read that university tuition fees may be capped at £9,250 - a sop to Corbyn's plan to scrap them and a poor attempt to connect with the young, who will see through it and feel insulted. 

Theresa May has tried to reassert her authority in Manchester this week but this is impossible, as all acknowledge she is a caretaker leader waiting in the departure lounge. Meanwhile, Boris Johnson is seen as the heir-apparent or even Jacob Rees-Mogg, both of whom come from the same familiar Tory stock.

Neither will serve to unite the Conservative party or the country; in fact, quite the opposite.  This week could well be defining in its contrast with Labour's triumph in Brighton. Brexit and Europe are dominating everything and both the electorate and business are bored with it and want to move on as soon as possible - but where to? It is fuelling the in-fighting and could well destroy the Conservative rule. After all, it was a self-made hospital policy pass from David Cameron, so they only have themselves to blame. 

Theresa May appears to still relish leadership and doesn't accept she is in the departure lounge. Many of her cabinet could be about to join her if there isn't some radical fresh thinking soon. We have seen this before as political eras come to an end. It is never smooth and often descends into personal battles, as internal fractures become terminal chasms. Whilst jostling for position, not only do they not realise they are entering the departure lounge but they have failed to observe the destination board. It is currently showing one flight from Ryanair and one flight from Monarch Airlines. One with a high risk of cancellation and the other already cancelled. 

Guy Stephens is technical investment director at Rowan Dartington.

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