Disruptive electorates are the new force in world markets
Published 24/06/2016 | 02:30
There is an old joke enjoyed by cynics; if voting changed anything they wouldn't let us do it. It's a joke that may have outlived its times.
Whether its the UK referendum, the rise of Donald Trump, or our own barely un-hung Dáil, political risk is re-emerging after many decades as a major issue in developed, Western economies. And markets long used to policy certainty are having to adjust.
That's a shock, especially to those of us that had gotten used to seeing the political world bend to the will of the markets.
During the financial crisis, in particular, any policy maker looking to break with the consensus around debt and spending could expect, and got, an unmerciful hammering from the bond markets, and promptly reversed tack.
Last night, and for the past eight weeks at least, the boot has been on the other foot. Markets have been bent massively out of shape by the rise and fall of UK opinion polls.
The world's financial powerhouses, primarily in banking and currency trading but stretching across almost every sector of the economy, have been on tenterhooks ahead of the vote.
The bond markets battering may still come but voters and some policy makers now care less.
After many decades when electorates in the developed world unfailingly returned pro-market, pro-globalisation administrations, markets are having to learn to live with new and unpredictable electoral forces.
David Cameron's Conservative Party bucked the worldwide anti-incumbent trend by securing an overall majority last year, but only by bowing to pressure to hold a Brexit vote.
Since that referendum was formally called in February, and especially once polls showed the slender gap between the Remain and Leave sides, the financial world has been at the mercy of the mood swings of the British public.
That's been most obvious in the currency markets, where the pound ebbed and flowed with the opinion polls.
Less obvious, but equally dramatic, has been the fall-away in all kinds of corporate activity.
Investment plans, especially large-scale ones, have been parked pending the referendum.
Figures published yesterday show the value of UK-linked mergers and acquisitions halved in the second three months of this year compared to the first.
The value of takeovers targeting UK business has slumped by two thirds so far this year, compared to early 2015, according to the figures from research firm Mergermarkets.
That kind of slump is extraordinary in a growing economy, and its cause is political, not economic. Decision makers, allergic to uncertainty, have postponed all plans until today.
Now, armed with the outcome, economic life can crank back into gear - for now. But coming down the tracks fast is the most unpredictable US presidential election in generations.