How Windy Is It . . . ? Monday, 24th April 2017 – No.226
As we noted at the beginning of the year, 2017 would be dominated by politics and it would seem that last week epitomised that statement perfectly.
Theresa May’s decision to call a snap general election was pure political opportunism at its best. A brisk campaign of just seven weeks is the perfect antidote for British voters who are feeling election-apathy. This plays into the hands of the Conservatives, who are in a healthy position in the polls and does not allow her opposition time to regroup and mount a credible campaign themselves. This is not all about Brexit though. Yes, it will give May more time in her negotiations with the European Union, without the pressure of a looming 2020 election hanging over her. It is also about building her own stronger mandate for the UK, rather than working through a mandate she inherited. We see this as an eminently sensible approach and should give the electorate confidence in her abilities as Prime Minister.
Turning to Europe we had the dreadful murder of a policeman in the heart of Paris, punctuating the end of a brutal presidential election campaign in France. The market feared a resurgence of populist politics, concerned that undecided voters would be influenced by this attack of terror. However, in a reversal of last year’s polling, the French election result went as predicted by the opinion polls. Why has 2017 been more favourable to polling than last year’s annus horribilis? It might be argued to be simply due to electorate turnout; the electoral attendance for the French election was in line with expectations and more importantly, in line with past elections. This was also a key factor in the Dutch elections last month and the accuracy of their opinion polls. The renewed success of the polls could mean that the market is more trusting of the second round predictions, which clearly indicates a victory for Emmanuel Macron.
Staying with politics, we have a dilemma brewing in the US. While the markets are concentrating on Donald Trump’s ability to push through on promised tax reforms and fiscal stimulus, we have a distinct possibility of a shutdown of the federal government at the end of the week. For those with long memories, we would refer you back to Windy No.51*, in which we discussed the first partial shutdown of the federal government for nearly seventeen years. So while the main commentators will be focusing on Wednesday’s tax plan announcement, there is the possibility, albeit short-lived, of a government shutdown on Friday.
So the markets say that Le Pen cannot win and May cannot lose, however for the final member of the triumvirate of European female political players, the outlook is not so certain. Angela Merkel’s fate will be decided on 24th September, just before the blueprint of how the European Union will be handling the UK’s divorce proceedings is published. One thing is certain: 2017 will continue to be driven by politics and policies.
*issue 51 was published on 7th October 2013.