Stories that people tell about markets have a way of reinforcing themselves. There are investors who begin to invest because they believe the stories are true. And there are investors who don’t necessarily believe the stories, but invest based on the conclusion that other investors may believe them. The dominant tale now — in the United States, at least — is that the market’s positive potential has risen because U.S. politics has changed.
Given how long the markets have operated under a grand narrative involving the “new normal,” it is hard to imagine that portfolios are well positioned for a world with Donald Trump as the U.S. president. We think that much money has yet to be moved around to respond to the new expectations for U.S. political regime change. Against this backdrop, we look deeper into the post-election U.S. stock market rally, the evolving landscape of European political risk, and China’s continued efforts to maintain control of its economy.