“The game is changing. No doubt about it,” reckons Mike Ingram, market strategist at brokers BGC.
“You need to stay on your toes. I do think there is going to be more volatility out there,” Ingram predicted in an interview with Proactive Investors.
“We’ve been in a monetary methadone-induced stupor,” Ingram said, but Donald Trump’s victory in the US presidential election has dialled the uncertainty factor up to 11.
Not that you would know it from the Footsie’s reaction on Wednesday, where the top-share index has actually dragged itself into the blue, but that apparent calm reaction disguises some very big moves in both directions.
Ingram noted, for instance, that tool hire firm Ashtead Group PLC (LON:AHT) sat atop of the Footsie leader board with a 7.6% rise, as Trump signalled his intention to try to get the US economy moving by spending more on infrastructure.
“Ashtead is a proxy on US infrastructure spend,” Ingram said.
So, in the words of Bette Davis in the film ‘All About Eve’, the advice is: “Fasten your seat belts”. It’s going to be a bumpy ride.
“The world is palpably a more uncertain place,” Ingram stated.
The interaction of politics and markets “is a difficult mix to navigate”, Ingram said.
“The one thing I am sure of is there’s going to be more volatility going into and through 2017. Politics is going to play a more influential role.”
Ingram pointed out that next year will see significant elections in both France and Germany. The Brexit negotiations are set to crank up, presumably from April next year, plus there are the ever-present problems with the central banks.
In Ingram’s view, politicians pulled away in the aftermath of the last financial crisis, leaving the central banks to do a lot of the heavy lifting, but Ingram thinks the banks are starting to run out of ideas.
“Japan, that’s looking very tired. They are running out of ideas; they’ve nowhere to go,” Ingram opined.
“I think that’s where we’re likely to go here,” Ingram predicted. “At some point in time it is going to be thrown back into the laps of the politicians.”
The strategist wonders whether the political parties are “going to be conducive to coherent policy thinking”.
If they are not, then investors are likely to head for the traditional havens, such as gold, the Swiss franc and the Japanese yen.
Meanwhile, the likelihood of a rate hike from the Fed in December seems to be receding.
The Fed might want to hold fire in December because of political uncertainty, but it can’t say that “without getting sucked into the political maelstrom,” in Ingram’s view.
In the end, its hand might be forced by economic indicators.