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Thin Ice.
I’ve just read a promotional newsletter. Its key points are:
– The US economy is strong.
– Corporate earnings are high.
– A Christmas rally is expected.
This may be true for the next few days or weeks – but after that bets are off. I hate to ruin the party but my view over the longer term is very different and it accounts for the volatility we are seeing in the market today.
Firstly the new political realities in the US will bring more chaos to the administration. The social chasm between the haves and the have nots will worsen. National debt will grow, sustained only by the dollar’s status as the world’s currency and by the the threat of the US defence capability.
The Administration has mistakenly tried to deal with long term challenges using populist quick fixes and it will reap the harvest of economic doubt and disbelief.
Secondly the crisis in Europe is worsening by the day. Its central bureaucracy, lacking sovereign powers, will fail to discipline Greece, Italy, Spain, Poland or Hungary, will fail to confront a hostile Russia in the Crimea, and will fail to manage the mess of Brexit.
Europe has mistakenly mixed political aims with economic ones and is reaping the backlash.
Thirdly China is a real and present threat to the US hegemony. It has the advantage of scale, history and a centralised soverign structure. The US has no coherent foreign policy unless it is to be the pariah of all nations – just look at the G20 body language. Beillicose bluster here is reckless. We need a long term restructuring of the world order to lead to collaboration and mutual cooperation. 
We are reaping the rewards of ill considered and illcoordinated zenophobia – the US is losing allies and empathy just when it wil need them most.
The US economy is forecasting growth of 3% but these major issues wil constrain that growth rate. Europe is the US’s largest trading partner – reversals there will impact us here. Collapsing South American economies wil mean a growing swell of immigrants into our southern borders. Climate change, the overwhelming challenge for this generation will threaten Miami, New York, London and Tokyo within the next generation. 
No nation can remain isolated. Nationalism, the last refuge of the scoundrel, must be replaced by global understanding.
The omens are not good.We are skating on thin ice and I can see no Western leader with the capcity to halt the slide.
Have a good day, James

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