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Defined as an ideological movement that says citizens are being disadvantaged and mistreated by a small group of privileged elite, it is easy to see why populism has been on the rise.
In the US, real wages for middle- and low-wage earners have been stagnant for more than a decade, yet the top 5% of earners have experienced a significant increase over the same period. If you see a neighbour that is doing really well and you feel you are struggling then that is when people tend to get dissatisfied.
This period has also coincided with the post-financial crisis recession and the slowest recovery from a recession in close to 100 years. Populism was seen as one of the key drivers behind the election of President Donald Trump in November 2016, but it is not solely the US that has seen it rise. Changes in the type of manifesto individuals are elected on can bring changes in policy, which in turn has an impact on stock markets.
Now we have a ‘populist’ president and he has different policies and methods of communicating with the electorate. He is seen as controversial, but despite his style and approach, he has been successful in terms of getting some of his key policies enacted. Apart from Obamacare reform, he has succeeded in lowering the corporate tax rate, allowing US companies to repatriate earnings at a low tax rate, and commencing regulatory reform.
We view the majority of his headline policies as pro-growth and pro-business and therefore see opportunities in the US equity market.
Chuck Cook – portfolio strategist. BNY Mellon Asset Management North America