Expect more political volatility in 2018 to follow an already volatile year, director for Europe and Africa at Control Risks, Nick Allen, told CNBC Monday.
"What we've seen is a real shift to national politicians driving the agenda and businesses are having to adjust to that," Allen said. "So more political volatility — we've had a lot of that in 2017 so more in 2018 is what we're looking at."
Investors are looking to the coming year and many are questioning just how extreme that volatility will be, given that markets have performed historically well even amid increased geopolitical risk.
"I think 'extreme' is probably an overstatement, but a number of things have changed, particularly from a business perspective," Allen noted. "Business by and large was used to the fact that most governments were fairly business friendly, keen to encourage investment. No one was ever calling the WTO, NAFTA into question."
Markets, meanwhile, have not been fazed by the political volatility of the past year, delivering record rallies amid a backdrop of increasing populism, an unpredictable U.S. president, escalating tensions in the Middle East, and wayward North Korean missile tests.
S&P Global on Sunday called 2017 the best year since 2013. The S&P 500 posted 61 new closing highs versus 18 last year, while the Dow posted 69 new closing highs versus 26 in 2017, tying the record set in 1995, according to an S&P Dow Jones Indices report. "Earnings, dividends, and cash set records," the report said.
Some of this is attributed to optimism that President Donald Trump will deliver on his tax overhaul. At the same time, the president's actions have contributed to widespread uncertainty concerning trade agreements, economic norms, international alliances and foreign policy.
"The U.S. does set the agenda, it's the most powerful nation on earth. The leadership matters, 2017 (is) very much the year of Trump," Allen continued. However, he added: "He hasn't yet really pushed through his protectionist policies — that is one of the risks we've highlighted."
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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