Politics looms larger than usual over today’s markets. There has been not one but two ‘black swans’ in 2016, and both were served up by voters rather than investors. The UK's Brexit vote and the election of US president-to-be Donald Trump – ‘Brump’, as some have rather inelegantly labelled this joint phenomenon – raise more questions than answers right now, though some expect a Trump administration to spur US growth.
The inward-looking result of the UK’s Brexit referendum was generally acknowledged as a downside risk for the global economy, and had forecasters scaling down their already subdued expectations for 2016. The Organisation for Economic Co-operation and Development (OECD) trimmed its world growth forecast for 2016 to 2.9%, down from 2015’s 3.1% and well below the long-run average of about 3.75%.
