Regime Change and Risk

Our CIO Jonathan Lewis recently conducted a roundtable with investors to discuss regime change and the risk-on, risk-off trade. His presentation highlighted the shift of power in the US congress, a more restrictive world trade system, governments moving from liberal democracies to nationalism, as well as all the different ways regime change is manifesting across the world. He then explored how these macro trends could affect capital markets and the different ways investors could attempt to mitigate risk and make sure their voices heard

Highlights of the roundtable below:

• The world order is being challenged from multiple fronts. The free trade world is moving towards a more restrictive tariff-based world trade system. Governments are moving from traditional, liberal democracies, to nationalist, and even fascist models. In conjunction, we are seeing the free press under attack and free expression being limited. Multiple countries have made aggressive, if not hostile threats to US vital interest, whose military presence and power across the world has drastically declined over the past two decades.

However, there are some bright spots:

• We’re seeing improvements in gender diversity not only in government but also in corporate America. 121 women, a record number, will be part of the incoming congress. 2018 was also record-setting for women nominees to boards of US public companies, with women representing more than 1/3^rd of the nominee class.

• We believe the declining price of oil is cause for optimism given the role petropolitics plays in the modern day. Oil rich dictatorships and repressive regimes, most notably in the Middle East and Russia, finance their activities with oil revenue. When the price of oil is lower, these regimes are financially weaker and the forces of freedom and democracy are stronger.

• Investors are findings ways to have their voice heard and have a positive impact through their investment portfolios by voting with their capital and their proxies.

• We expect that increased shareholder activism will serve as a good risk mitigatory and should be better for capitalism.

Click here to read the full commentary.

The information presented is for informational purposes only and is not intended to be, and should not be construed as, an offer to sell, or the solicitation of an offer to buy, any investment product. The information should not be construed as legal, tax, accounting or investment advice; recipients should consult with their respective advisers regarding such matters. Views and opinions expressed herein are as of 12/20/2018, and are subject to change with no obligation to update. Statements regarding current conditions, trends, or expectations and forecasts with respect to the financial markets or the global economy are based on subjective viewpoints, as well as public and third party sources believed to be reliable. There is no guarantee that such conditions or results will materialize.