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Populism, Trade And The Markets


  • Much of our prosperity in general and shareholder returns in particular depend on the global economic order of relatively free trade and capital flows.
  • That order has been singled out as the source of stagnation by an increasingly populist movement.
  • While there are indeed groups left behind from the disruption caused by trade, it is far from the only disruption in a capitalist system that is powered by creative destruction.
  • What can be done to take the wind out of the sails of the populist and preserve the world economic order turns out to depend on the type of populism.

We are not sure all investors appreciate enough how much their gains, especially gains in the shares of big international economies depend on an international order that guarantees near free flow of goods and capital.

Big international companies are supported by complex international supply networks that are fine-tuned, lean, and very vulnerable to disruption. We have seen what an earthquake in Japan or flooding in Thailand can do to the supply of critical electronic parts, hobbling whole sectors, and this is just one example.

We tend to take this world economic order for granted, but the world has seen a rise in populism that threatens this world economic order, as it could lead to protectionism and a decline of the common institutions that underpin it.

The threat comes from those that are deemed not to benefit from this world order, but we think the negatives are overblown.

This is a serious issue also for investors, many of the large capitalized stocks they invest in have benefited enormously from this global economic order of relatively free flows of capital, goods, services and know-how.

Any serious sand in the wheels here and things could become considerably more awkward for the big multinational corporations and their shareholders, so we take this issue with some keen interest.

We already see some of the damage emerging in Britain as a result of Brexit, which was the product of a populist backlash. From Yahoo:

British factories were left out of a demand-driven surge in activity across much of Asia and Europe in June, as weakness in sterling failed to translate into export growth, surveys showed.

And from the Guardian:

One third of non-British workers are considering leaving the UK, with highly skilled workers from the EU most likely to go, according to new research into the

This article was written by

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Finding the next Roku while navigating the high-risk, high reward landscape

I'm a retired academic with three decades of experience in the financial markets.

Providing a marketplace service Shareholdersunite Portfolio

Finding the next Roku while navigating the high-risk, high reward landscape.

Looking to find small companies with multi-bagger potential whilst mitigating the risks through a portfolio approach.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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