Rising inequality in developed markets – although reduced inequality worldwide due to increasing standards in emerging markets – gives rise to voter discontent and populist policies – first the right and then the left.
Intervention can occur in several ways – trade tariffs, tax changes (negative gearing, franking credits), royal commissions, state ownership of private assets (Corbyn) – but all bring uncertainty and risk for investors.
Globally we see a retreat from the free(r) market values that have underpinned the globalisation process. The world believed that once China secured more wealth, the Chinese would embrace Western values. This was mistaken, and we view the recent trade friction between the US and China as a symptom of a recalibration in western policy to China’s expanding political and military goals.