Charting New and Dangerous Waters -

Lloyd George and Epictetus may be long gone but their words have much resonance with the events of 2016. The political fallout from the UK’s vote to leave the European Union (“EU”) was immediate and brutal and Lloyd George’s words above could have been written for the events in the UK in the aftermath of the vote. Prime Minister David Cameron resigned immediately. Theresa May became the new UK Prime Minister after a short and dramatic Conservative Party leadership election contest, following which she swiftly sacked Chancellor of the Exchequer George Osborne and appointed Boris Johnson, not known for his diplomatic turn of phrase, as UK foreign secretary (days after he had withdrawn from the leadership race after a spectacular falling out with his fellow Brexit supporter Michael Gove). In the subsequent months, the new UK government has had to plot a course for the UK to negotiate its exit from the EU, regarded by many commentators as likely to be one of the most complex political and trade negotiations ever attempted. And this in a continuing febrile political environment with many Brexit supporters suspicious that the UK government will strike a deal with the EU that will neuter the effect of Brexit, many businesses and financial institutions concerned that a “hard” Brexit could result in a swift loss of access to the EU single market and many EU politicians keen that a hard line should be taken against the UK in negotiations to deter other member states from leaving. Financial markets, initially stunned by the result, reacted with the pound losing 15% of its value against the dollar (falling to a 30-year low), but they have subsequently stabilised although the potential for future volatility remains acute.

As if that wasn’t enough, the election in November of Donald Trump to the Presidency of the United States shocked not only the political establishment in the US but almost the entire world. Again, despite some initial jitters, financial markets have remained relatively stable in the aftermath of his election but considerable uncertainty surrounds the direction of the new administration with President-elect Trump having made inconsistent statements on the stump, at times espousing protectionist views on trade whilst calling for less financial regulation and greater fiscal stimulus. We should have more clarity on some of these issues in the coming months.