What's going on?
They say nothing’s certain but death and taxes – and according to a report from Deutsche Bank this week, investors might very well agree…
What does this mean?
Deutsche Bank’s “global economic policy uncertainty index” is currently sitting at record highs. In plain English, that means investors aren’t sure what to expect from central banks in 2019; and, thanks to the state of play in international politics, the central banks themselves are also grasping in the dark.
The US-China trade conflict remains unresolved, despite hopes that positive talks last week may yet avoid further trade taxes. Speaking of the US, a record 27-day (and counting) partial government shutdown is costing it $1.2 billion every week – and may soon start hitting company profits, too. In the UK, meanwhile, a parliamentary vote on Tuesday to reject the divorce terms negotiated with the European Union leaves their post-Brexit relationship far from certain.
Why should I care?
For markets: Economies – and investors – are blindfolded.
All of these political uncertainties have an economic impact. In the case of trade war and Brexit, big international trading tariffs could clobber company profits in an already slowing global economy. And with parts of the US government closed for business, companies are being left hanging on things like new licenses (and even, for Uber and Lyft, stock market listings). Central banks, whose policies can speed up or slow down economic growth as appropriate, are on tenterhooks – and so are investors.
The bigger picture: One thing remains constant: company mergers.
Two of the biggest financial technology companies you’ve never heard of, Fiserv and First Data, announced a $22 billion mega-merger on Wednesday. It’s just the latest in a swath of deals that’s seen different parts of the digital finance universe coming together to provide ever more joined-up services – and present a united front against upstart competition.