Populism and Washington dysfunction are two key risks for markets in 2017, and last week was an important one for both.
Despite the recent media frenzy over whether or not Congress and the President will avert the “fiscal cliff,” we have until now resisted commenting for three reasons.
As has been the case for much of the year, Europe remains top contender for its potential to create headwinds on the economy and the markets. However, it was not just European citizens that took the month of August off. Last week, Congress broke for recess, leaving many questions unanswered.
Lewis Carroll played with logic and fantasy in Alice’s Adventures in Wonderland, leaving popular culture with enduring characters such as the frightening Queen of Hearts, the mad Hatter and the deliriously confused March Hare. The second quarter, one of the more volatile in recent memory, provided quite an adventure for markets. Investors became more anxious as policymakers on both sides of the Atlantic continued to jump down rabbit holes into a land seemingly devoid of any reality.
As we turned to celebrate Thanksgiving, a holiday based on the ideals of compromise and cooperation, the 12-member bipartisan “Super Committee” failed to reach agreement on how to help solve our country’s looming fiscal crisis. With both parties focused on winning next year’s Presidential election, there was little incentive for an honest effort at making progress now. Though expected by most, the Super Committee’s failure still offers cause for serious concern.
We often talk about the “art” of conversation, but rarely the “science.” Conversation is, in fact, more often viewed as an art – something suggesting free form, creativity, fact, fiction and any other creative injection without regard for accuracy or truth – rather than as a science. However, these are not the types of conversations Milton Wright envisioned. Today, the result is that many of our conversations between politicians and political parties on issues like the debt ceiling are not really conversations at all, but instead, they are statements of belief that reflect party interests and incorporate a combination of truths, half truths and occasionally even falsehoods.