Eq: Dev ex-US
For the first time in half a century, Sweden is seriously prepping its country for the possibility of war. Growing national anxiety over the threat of Russia has led the government to send out 4.7m information pamphlets to all households informing them of what to do in the event of war. “All of society needs to be prepared for conflict, not just the military. We haven’t been using words such as total defence or high alert for 25-30 years or more. So the knowledge among citizens is very low”, says the government. The country is also considering whether it should join NATO.
FINSUM: The Baltics and Scandinavia are particularly exposed to possible Russian military aggression, so it makes sense they are nervous.
While it has largely faded from the American consciousness, the fallout over 2016’s Brexit vote has been nothing short of an absolute mess. The negotiations for departure have finally made a little progress, but are plagued by internecine warfare at every level. Now, a push for a second referendum, which could refute the first, is gaining traction. Former PM Tony Blair is urging his liberal party to back a second vote. Blair and Liberals believe that leaving the EU is not the solution that will fix the worries of Leave voters.
FINSUM: We think this situation only has upside for investors. If the UK reversed its positon, it would lead to a rally in the Euro and Pound and be bullish for most asset classes.
The standoff between Madrid and Catalonia took an unclear turn yesterday. Facing the prospect of immediate arrest if he declared independence for Catalonia, the region’s leader, Carlos Puigdemont, did not declare full independence when speaking to the region’s parliament yesterday. Instead, he stopped one step short, saying he fully supported independence, but wanted to pursue dialogue. Madrid reacted by not arresting him, but simultaneously threatening to suspend Catalonia’s autonomy and demanding clarity on the region’s position after Puigdemont’s vague speech.
FINSUM: This situation is very tenuous, and it is difficult to predict where it might head. That said, the relationship between Spain and Catalonia seems very inflamed, especially on the Spanish side, which seems different than other recent sovereignty debates (e.g. Scotland and the UK).
Investors, get ready for what could be a very ugly situation. In a worrying sign of escalation in the ongoing struggle between Catalonia and Spain, Spain is reportedly preparing a team to arrest the leader of Catalonia. Madrid says that if Carlos Puigdemont declares independence for Catalonia, he will be arrested. He is due to speak tonight at 6pm Spanish time, and depending on the specific wording of his address, Madrid may decide to arrest him or back off. Puigdemont has already commented on the matter, saying it will be better to be in jail than stay Spanish.
FINSUM: This sovereignty debate has gotten very testy and personal. We are worried about Spain, especially given its history of internal strife. The situation seems like it could devolve quickly, and if it does, it may have brutal implications for markets.
Europe seems to have been in the middle of a slow moving fragmentation since at least the Financial Crisis. The plodding fissure accelerated last year when the UK voted to leave the EU, and is once again quickening as Catalonia attempts to secede from Spain. That move may not be the last though, as a new frontier seems to be opening in the rupture of Europe: east vs west. Eastern Europe and western Europe are increasingly at odds over immigration and national sovereignty and it is leading to some bitter rhetoric and legal standoffs that may ultimately push an EU state like Hungary, Czech Republic, or Poland to leave the bloc.
FINSUM: Europe is in the middle of a slow-moving and hard-to-predict crisis, but we thought advisors should have their antennae up over where things might be headed.
Everything was expected to go very smoothly in the British election. The dominant Conservative party, led by Theresa May was expected to cruise to a huge majority in parliament. However, yesterday everything went wrong, as Labour (the left) gained a huge share of parliamentary seats and stripped the Conservatives of their majority. May may be compelled to resign as PM, potentially setting the stage for another election in the near-term. The lack of a majority means there is a “hung parliament”, which will force a coalition government. All of this is leading to doubts over the Brexit negotiations with the EU, and even Brexit itself. On the whole, it seems the coalition government will lead to a significantly “softer” Brexit, where the country might stay in the single market.
FINSUM: This was a shocking development. The Pound dropped on the news, but in the long run it is probably good news for the economy (i.e. a softer Brexit).