Leap year blues?
The start of any new year is a time both for reflection and contemplation, and this year is no different.
2023 was certainly a year of ups and downs. Financially, it saw an initial spurt and share markets, followed by a significant retreat, more than recovered by the strongest bounce back for some years. We have more to say on this in our upcoming quarterly economic commentary. Politically, we saw a change in government, while from a social perspective the year was also the first full “post-Covid” year.
Taking travel as an example, with near-normal flight schedules and the cruise season back to pre-Covid levels, it was as if Covid had never happened. Comments made by many in early 2020 that “Covid will change things forever” simply haven’t happened for the most part. Even the brief burst of working from home is slowly reverting back to more of a balance, as companies require staff to spend a reasonable amount of time in the office, and employees themselves realise the many benefits to working and socialising together. As we commented in 2020, in the end, human nature doesn’t change – we still want to socialise, have adventures, buy the necessities of life, worry about our retirement, spend time with family, and none of that has changed at all.
So what of 2024?
If you listen to half a dozen commentators, you get half a dozen different views. Some will say that is all doom and gloom – potential war in the Middle East, the potential (and increasingly likely) re-election of Donald Trump and all that could mean for American democracy, recession in New Zealand, and big leaps backward for workers and the environment here. Others may take a rosier view: they have hope for the sanity of American voters, and a more positive view of the world as a whole and its economic fortunes.
Are things really going to be as bad as we think, or as good as we hope?
The big event this year will be the US election.
Should Donald Trump be re-elected, we can expect a much more politicised American establishment with potentially thousands of senior people under threat for no other reason than a perceived anti-Trump bias. It could well be vendetta time. It would also be a more isolationist America, too – bad news for Ukraine. However, we should remember that whatever we think of Trump, he does represent a significant group of people who feel lonely, disenfranchised and unheard, and we ignore them at our peril.
What is more important though, is the make up of both houses of Congress. By all accounts, the election will be a tight one for the presidency, but it could also be the same in Congress. It is conceivable that a re-elected Trump could face one or both houses controlled by the Democrats, thus frustrating Trump’s more outrageous moves. Currently, few Republicans are prepared to stand up to Trump, leading to a party that is increasingly spouting a particular narrow, hard right political and social agenda. How much of this is real and how much of this is simply “keeping heads down” is hard to tell, though.
As we commented back in 2016 when Trump was elected, there are several factors that ultimately should save the United States.
- The US has a long tradition of liberal democracy, stretching back nearly 250 years. It is hard to imagine that Donald Trump and a reactionary aspect of the Republican Party could trash this in four years.
- Unlike many countries that have elected populist leaders – Brazil, India – the US has a strong tradition of an independent media.
- The US is also not one country, but 50. It is really the world in microcosm, for better and for worse.
- Biden’s incongruously-named Inflation Reduction Act – which allocated billions to renewable energy – is now so embedded in various states it’s hard to see it being cut back significantly.
- Finally, the US is a capitalist economy. What major companies say and do matters hugely. With more and more companies aiming to be “good corporate citizens”, ESG (environment, social and government) trends are reflecting what companies believe US citizens want – not what a reactionary government might say.
For our thoughts on matters economic, watch out for our upcoming commentary later this month.