There’s Opportunity in a Global Slowdown

Be Ready for the Populist Backlash


I love the Brits.

At one time, the plucky people across the pond controlled most of the developed world. They conquered places, established trade routes, and even repelled potential invaders, all while keeping a stiff upper lip and relying on personal responsibility.

The British government created the “Keep Calm and Carry On” motto in 1939 to inspire their people during the German bombing campaigns. What other nation would tell its people, “Never mind the bombs, go about your day”?

Now the Brits are giving the European Union the finger as they try to find a way to extricate themselves from the economic bloc, even though it will cost them money.

It’s like the old joke about divorce: Why is it so expensive? Because it's worth it.

The Brits might be the best example of the sentiment, but they’re hardly alone.

People around the world are trying to “divorce” themselves from global arrangements that bleed them of their national identity while handing power and wealth to a dwindling few. The idea of getting electronics or corn for a few cents less hardly seems worth handing over control to people in faraway places who swear they have your best interests at heart.

From Trump’s election to Angela Merkel’s latest setbacks in Germany to the yellow vest protests in France; people around the world are telling their governments that enough is enough. They want local control.

I get it, and I applaud the sentiment, being a small government guy myself. But make no mistake: This trend will crack open the global financial markets, leaving big gaps between winners and losers.

Domestic companies will do better, and global providers will have a harder time. Banks should feel a lot of pain as the flat or inverted yield curve drains profits out of their net interest margin.

It will be difficult for any country to follow the “Buy Domestic” approach because the global supply is so entrenched.

But the bigger trend will be a global slowdown. Populists will save a bit of their culture and give up a bit of their standard of living, even if they don’t recognize it. And global slowdowns are never good for stocks.

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