Bloomberg Businessweek - USA (2019-06-10)

◼ FINANCE

30

ILLUSTRATION

BY

MOLLY

ROSE

DYSON.

DATA:

FEDERAL

RESERVE

BANK

OF

PHILADELPHIA; BAKER, BLOOM & DAVIS

something central banks have been unable to

do. At the same time, institutions and global agree-

ments are under threat. “Longer term,” the analysts

wrote, “we fear populist policies may spur decay

ratherthanregeneration.”

Intheshorterterm,there’sa presidentialelec-

tioncoming,andinvestorswhogotsucker-punched

in 2016 are starting to wonder if another, poten-

tially less market-friendly phase of populism might

be in store. There’s a sense that the genie of eco-

nomic change is now out of the bottle.

Think tanks aren’t the only go-to source for inves-

tors worried about such matters. There’s a small

industryinWashingtonprovidingpoliticalanaly-

sisforinvestors,andtheysaythey’vebeendoing

anunusuallybriskbusiness.AndyLaperriere,head

ofU.S.policyresearchatCornerstoneMacroLLC

in Washington, says Wall Streeters typically wait

untilLaborDayinanelectionyear—whenthevote

is a merecoupleofmonthsaway—tostartplacing

betsonballotoutcomes.Rightnow,they’rerun-

ningmorethana yearaheadofthatschedule,he

says.They’rerivetedbycandidateproposalsand

hungrytoknowhowin-partysentimentis swing-

ing.“WhenI doa pieceon2020,peopleareallover

it,”Laperrieresays.Andhealth-carestockshave

alreadybeenhammered,thankstorisingsupport

amongDemocratsforMedicareforAll.

Tobesure,legislationforuniversalhealthcare,

eventhoughit hasabout 100 Housesponsors,may

endupgoingnowhere.Manyinvestorsarebet-

tingthatthecenterwillhold.Theycanpointto

earlypollingthatshowsformerVicePresidentJoe

Bidentheclearfront-runneramongDemocrats.His

associationwiththeObamaadministration,whose

policyagendais alreadya knownquantity,is reas-

suringtosomeinvestors.“Manymoreideasare

likelytobeaired,”saysEllenHazenatF.L.Putnam

InvestmentManagementinWellesley,Mass.“But

theultimatepathforwardforpolicymaynotbeso

different.”Hedgefundsexpresseda similarviewby

snappingupbatteredhealthstocks.

Buthealthcareisjustoneofmanylive-wire

issuesloomingin2020,fromclimatechangeand

deepeningincomeinequalitytothedebtburden

on U.S. students. The Democrats’ proposed fixes

aren’t all well-defined at this stage—but even the

watered-down versionsrepresentsubstantial

changes.ElizabethWarrensupportsa wealthtax,

andonJune4 proposed replacing the Department

of Commerce with a Department of Economic

Development focused on jobs. Bernie Sanders

backs a Green New Deal, and both—along with

Kamala Harris and Cory Booker—have signed on

to plans for loan-free college. Meanwhile, Trump

is intensifying his war on immigration by slapping

tariffs on Mexico, a move that immediately rat-

tled markets.

The sense that something’s shifting in capi-

talism isn’t confined to American investors. At

Deutsche Bank AG, Chief Economist Torsten Slok

finds his number crunching is regularly interrupted

by clients from Copenhagen to Hong Kong asking

about politics. Many of their questions are tough

to answer because “we just don’t know what form

and what shape populism will come in,” he says.

“It’s a new uncertainty, it’s very uncomfortable,

and it’s everywhere.”

IntheU.S.,discomforthasdeepened,even

thoughtheeconomyisabouttobreakrecords

forthelongestexpansionever,withinflationsub-

dued,unemploymentratesnearhistoriclows,and

wagesfinallypickingup.Howelsetoexplainthe

Measuresofpoliticalturmoilreportedin news

PartisanConflictIndex(U.S.) GlobalEconomicPolicyUncertaintyIndex

2018 shutdown,

Brexit woes,

Fed fears ...

1/2000 4/2019

200

100

0

Sept. 11

attacks

Invasion

of Iraq

Brexit

vote

Trump

elected

Lehman

bankruptcy

2013 U.S.

government

shutdown

Europe’s

sovereign debt

crisis spreads