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Political risks: a big test for markets in 2017

Friday, December 30, 2016 - 01:33

The global economy has withstood several crises since 2008 but for financial markets the biggest tests may be to come. After several shocks this year some investors are looking closely at the many politcal risks ahead in 2017. Sonia Legg reports

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World stocks were doing very well as the year drew to a close, despite a slowing China and shocks in Britain and the U.S. But next year political risk is expected to be one of the biggest tests. First up President Trump and his relationship with the world's second largest economy. (SOUNDBITE) (English) HEAD OF CORPORATE DEVELOPMENT, 7IM, JUSTIN URQUHART STEWART, SAYING: "He needs the Chinese - afterall they are the second largest holder of American debt and he would probably like them to buy some more and certainly not sell it. But equally the Chinese need the Americans because they are one of their largest trading partners, they need them to be still buying Chinese stuff." Brexit was the other shock of 2016 - and Britain's expected to file for divorce in March. That's when the Dutch go to the polls - with Geert Wilders' right -wing Party for Freedom potentially shaking things up. And just weeks later there are elections in France. (SOUNDBITE) (English) HEAD OF CORPORATE DEVELOPMENT, 7IM, JUSTIN URQUHART STEWART, SAYING: "If we predict anybody winning this we are going to look as stupid as we did with Brexit and with Trump or any of the other issues which were apparently dead certs going one way and it'll go the other way." Marine Le Pen's right wing National Front party is providing the element of uncertainty. (SOUNDBITE) (English) HEAD OF CORPORATE DEVELOPMENT, 7IM, JUSTIN URQUHART STEWART, SAYING: "If it is Madam Le Pen that is coming then I don't think she is going to be saving the EU, it may well be that's the end of the euro." That's unlikely but neighbour Germany may be crossing a few fingers, with Angela Merkel up for re-election in October. (SOUNDBITE) (English) HEAD OF CORPORATE DEVELOPMENT, 7IM, JUSTIN URQUHART STEWART, SAYING: "Despite the fact that her policies of the last year, particularly with regard to immigration, were unpopular she's likely to be elected but I suspect the majority is going to be much thinner overall." And that could make fat profits hard to come by in 2017.