Domestic Shares – Keeping the public employed and happy is getting tougher

Schroders Australia

The surprise 'Brexit' vote result towards quarter end served as a stark reminder of increasingly tenuous linkage between the financial economy and the real economy. Politicians and those connected to the financial economy were almost universally in favour of remaining part of the EU. Warnings of the consequences of exiting were dire. Recession, collapsing currency and upheaval were only the beginning. Initial financial market reaction will prompt the "I told you so" response. The question of why membership or otherwise of the EU should have outrageously beneficial or catastrophic economic consequences (as distinct from financial market consequences) is more difficult to answer. Trends towards protectionism and increasing distrust of the political establishment are evident globally, with 'Brexit' merely being the most high profile and recent manifestation. Having happily enjoyed the benefits of 'globalisation' over past decades as manufacturing capability was shifted to developing countries allowing a myopic measure of inflation to justify ever lower interest rates and booming asset prices, the other side of this cycle is proving decidedly less popular. (VIEW LINK)


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