Politicians' good habits must get the better of their bad ones, writes Tom Walker, manager of the Martin Currie Global Portfolio trust...
As we reach the time of year by which New Year’s resolutions have traditionally faltered, or been abandoned completely, it is perhaps unsurprising to note how few of 2012’s macroeconomic problems have actually been solved, despite concerted political action across the globe.
The US has the same president, the same problems persist in the eurozone, and China’s new government appointments appear largely cosmetic.
Although some things are different, such as the new political leadership in Japan, 2013 looks likely to be a year of more of the same, certainly in terms of people and policies.
Prepare yourself for another year of political noise...
Equity markets have begun the year in bullish mode. In the US, the market was buoyed by the ‘resolution’ of the fiscal cliff problem, while the main feature in Europe has been the continued strength of bank stocks, particularly those in more ‘troubled’ regions.
This rally is being at least partially driven by an increase in risk appetite, a sign of the more supportive regulatory approach and an increased confidence that Europe and the European Central Bank will do ‘whatever it takes’ to support the eurozone.
The current optimism, fuelled by an increasingly interventionist approach by politicians and central banks, is, however, in contrast to much of last year, when the defining macro characteristic was political dithering.
As the year ended, politics dominated the global agenda, with elections in the US, Japan and Korea, while China had its own political transition, albeit with typical stage management and media control.
In the US, there was little time for celebrations in the wake of Obama’s victory, with attention swiftly refocusing on the upcoming fiscal cliff. In the end, a deal was done, but the issues of the debt ceiling and spending cuts were postponed and must now be resolved early in 2013 (or delayed further).
In Asia, recent stock market reactions to political developments have been impressive.
Japan’s snap election in December saw the Liberal Democratic Party elected on a ticket of monetary easing and economic stimulus.
In another sign of the global shift to re-politicise central banks, new prime minister Shinzo Abe called for swift and decisive monetary policy from the Bank of Japan to weaken the yen, eradicate deflation and stimulate economic growth.
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