Volatility and arriving back at the beginning
There are indications that the mess that occurred since the election of Trump in the USA has returned valuations to where it started. The difference now is that we are living through a much more volatile world, so it is a now not about growth, but downside risk.
- The US Dollar index shows that we are essentially back to where we were before ride with Trump started.
- Investor market indexes are now where they started, sort of.
Trade wars, real wars, massive shifts in American economic policy, distractions, and freak-outs have all created what now looks like a classic pump and dump scheme by fraudsters.
While the return to where we were in October in some indexes and the new announcement that there might be trade negotiations between China and the USA and renewed hope of negotiations with Canada, it is clear we have not "returned" anywhere. Hidden in the average is a very different world of investment.
The liberal centre of politics (including the Labour Party in the UK and the Liberals in Canada) seem to not quite understand the situation. In response to the failure of free trade, they continue to promote free trade as the answer. While unsurprising, it is hardly a solution to any of the current crises we face and a distraction.
We must continue to say it, because we are lulled into the "reasonable" position of thinking negotiations are real.
President Trump has now said he would directly set tariff levels and trade concessions for partners trying to avoid higher duties. This is not negotiation, but agreement by diktat.
Canada's economy is already being massively impacted by our leader's continued belief there are benefits to sustained longer-term integration with the USA's economy.
The volatility of trade will be higher over the medium term and auto tariffs have not arrived in the indexes yet.
Beyond Canada, the world's economies are facing an economic order that is buckling. From air-traffic control, to electricity and green energy, to defence, to trade, ports, and an ongoing digital transition that is completely unregulated.
The question for the left as we attempt to navigate these multiple crises is to understand where we actually are from one moment to the next and respond coherently and consistently. No small task given that the policy makers that work for Capital are having trouble with this question.