Sometimes it's personal

Markets react to personalities.

This week the German Finance Minister lost his job the Chancellor scuttled around trying to knit together a meaningful coalition with two parties not used to Government.

Wolfgang Schäuble will be remembered for several things but his almost personal battle with former Greek Finance Minister Yanis Varoufakis driven by their unshakeable views but also by their clash of personalities characterized the whole European debt crisis.

Of course, statesmanship is dead, that is why it is becoming increasingly unlikely that Brexit will even reach a conclusion. Petty threats and throw away comments have become the new way and Millennials are beginning to resist.

Will there ever be another Yalta when the world believed that Churchill, Stalin and Roosevelt could solve any problem. Could Trump versus Kim and their ridiculous squabbles bring about genuine global change as was created by the clash between Khrushchev and Kennedy?  No, we are stuck with wishy washy politicians showing various degrees of self-interest with egos to match.

It is little wonder that the markets react so violently to global issues as they occur because traders know that Politicians no longer have the wherewithal to cope on the grand stage.

Don’t forget to look both ways!

The immortal words of my mother when she sent me on an errand where I would have to cross the “big road”.

It is also sound advice for traders. Three months ago, at the start of the quarter that has just ended, the single currency was apparently headed for crazy levels; 1.2500 versus the dollar and parity with the pound.

We all now know about black swans but since they are entirely unpredictable there is little point worrying about them. But it is the possibilities that traders should concern themselves with. The three drivers of the market; macroeconomics, monetary policy and politics are there for all to see so as you formulate your trading strategy, “left field” events should be anticipated if not expected.

The market got very long of Euro’s and very short Sterling over the past six months. The dollar moved up and down reacting to the rhetoric of Trump and the comments of Yellen. Once concerns over the “lurch to the right” were over everyone was happy to buy the single currency since the German election was foregone conclusion. As it turns out, Germany was lurching to the right which no one expected despite warnings of the gains being made by AfD. The Far-Right party were expected to make gains but no one really look at who would be losing the votes that AfD gained. The result has been a severe weakening Frau Merkel’s position and her being forced to provide sweeping concessions to the Green Party and FDP.

Brexit; dying on its feet.

Brexit is going to happen! Of that there can be no doubt. As the conservatives start their annual conference, it really should be held on the Ides of March, quite how a departure without agreement can be avoided should be the question on every delegates lips.

A few weeks ago, the Foreign Secretary, Boris Johnson tried to spike his boss’s guns by upstaging her, supposedly game changing, speech in Florence. Now on the eve of the Conference, he is at it again this time providing even more evidence of the gulf between the Hard and Soft Brexiteers.

He has said; the transition period should be not a day over two years, no new EU rules will be applied in the U.K. during that period, no payments to the EU after the transition period and no shadowing of EU rules in order to gain access to the single market. Those conditions could not be further from the views of Theresa May and should lead to Johnson’s departure from the Cabinet and a leadership challenge.

The opposition Labour Party has just finished its conference ending with the most hackneyed phrase in British Politics; “Go back to your constituencies and prepare to Govern”. Forget EU citizens leaving in droves, if Socialists are elected, there will be an exodus of talent as high tax payers are squeezed in a comparable manner to the 1970’s.