Despite what you might think, risk markets are in a sweet spot

Here's three reasons not to worry.

The next six months could well be easy going for equity markets, and even the more exotic markets, like emerging market bonds, which suffered when the story first broke about ‘tapering’: a possible reduction in the US Fed’s Quantitative Easing programme. Let’s consider this and the other oft-perceived threats to the markets.

QE. Yes, QE may be tapered, but only probably, not definitely, as Bernanke was at pains to emphasise in the Q & A session following his recent speech at a National Bureau of Economic Research conference. It all depends on the data, and he assured us they are actually also worried that inflation may be too low. I think we’ve seen the bulk of the rally in US Treasury yields for now. For the next few months, I think the stock markets can live with this scenario - if data’s weak, QE will go on longer, if data's strong, then companies are going to be more profitable. Taper-shock is rapidly fading.

China. I definitely do not fall into the camp that believes China is a powder-keg waiting to explode, leading to global financial and economic Armageddon. Banking systems rely on confidence. Confidence in the unlimited supply of funding, confidence that borrowers, public and private, are solvent and able to repay, confidence that collateral values, e.g. house prices, will only ever rise.

Now, institutional over-indebtedness may well have become endemic in China, but certainly not amongst individuals, and the whole pack of cards is, as ever, dependent on the same ‘confidence trick’. Although China’s sensible determination to rebalance its economy away from investment-lead growth and towards consumption is no doubt weighing down on headline GDP, in the Chinese tradition the measures will be introduced gradually and pragmatically, as evidenced this week by senior leaders’ comments. Whilst Vice Premier Zhang Gaoli said that the government would "expand domestic demand", he also assured us they would "try every method to provide funding to support SMEs, exporters, and technology firms". Premier Li Keqiang was quoted as saying that the government would "prevent economic growth from slipping below the lower bound".

With $3.3tn in foreign exchange reserves alone, which it could quietly use to rescue the banks - I suspect we’d never even know a banking crisis had happened.

The Eurozone. Portugal, Greece, Cyprus, even France, surely we face a summer of cataclysmic popular discontent on the streets? Nope. The lesson of the Eurozone crisis is the Germans and the ECB will ride to the rescue-sure, there’ll be a to and fro over austerity measures, wrestling with the balance between creation of moral hazard in the South and ensuring the Euro’s survival, but I believe the nexus of self-interests implies we have reached a state of equilibrium. This is admittedly an inherently unstable equilibrium because of the absence of a fiscal union but, once Merkel has won her election that, and its sister, banking union, will be front and centre and suddenly on the cards. Right now she can’t say so, because of the election, but she knows the Euro won’t survive another five years without them. 

Federal Reserve Board Chairman Ben Bernanke speaking at a new conference in June 2013. Photograph: Getty Images.

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Jeremy Corbyn's fans must learn the art of compromise

On both sides of the Atlantic, democracy is threatened by a post-truth world. 

Twenty years ago, as a new and enthusiastic Labour MP, I wrote an article for The Observer in praise of spin. I argued that if citizens are to be properly informed and engaged in their democracy, politicians - and in particular governments - have a duty to craft their messages carefully and communicate them cogently. It was a controversial notion then but less so now that we have entered the era of post-truth politics. In the old days, we used to "manage" the truth. Now we have abandoned it. 

We’ve probably come further than we think, for when truth is discarded, reason generally follows. Without a general acceptance of the broad "facts" of any matter, there can be little basis for rational debate nor, therefore, for either the consensus or the respectful disagreement which should emerge from it. Without a commitment to truth, we are free to choose and believe in our own facts and to despise the facts of others. We are free too to place our faith in leaders who make the impossible seem possible. 

We condemn the dictatorships which deny their citizens the right to informed and open debate. But in our own societies, unreasoned and often irrational politics are entering the mainstream. 

The politics of unreason

In the UK, the Leave campaign blithely wedded brazen falsehood to the fantasy that Brexit would cure all ills – and millions of voters enthusiastically suspended their disbelief.  “We want our country back” was a potent slogan - but no less vacuous than the pledge to “make America great again” on which Donald Trump has founded his election campaign. On both sides of the Atlantic, people want to take back control they know they never had nor ever will.

Both campaigns have deliberately bypassed rational argument. They play instead to the emotional response of angry people for whom reason no longer makes sense. Since the time of Plato and Aristotle, democracy’s critics have warned of the ease with which reason can be subverted and citizens seduced by the false oratory of charismatic leaders. Trump is just the latest in a long line of the demagogues they feared. He may not make it to the White House, but he has come a long way on unreasoning rhetoric - and where he leads, millions faithfully follow. He has boasted that he could commit murder on Fifth Avenue without losing votes and he may well be right.

But if Trump is extreme, he is not exceptional. He is a phenomenon of a populism of both right and left which has once more begun to challenge the principles of parliamentary democracy.

Democracy in decline

All over Europe and the United States, consumer-citizens are exasperated by democracy’s failure to meet their demands as fully and as fast as they expect. If the market can guarantee next day delivery, why can’t government? The low esteem in which elected politicians are held is only partly the consequence of their failings and failures. It is also evidence of a growing disenchantment with representative democracy itself. We do not trust our politicians to reflect our priorities. Perhaps we never did. But now we’re no longer prepared to acknowledge their unenviable duty to arbitrate between competing political, social and economic imperatives, nor ours to accept the compromises they reach - at least until the next election.

We have become protesters against rather than participants in our politics and, emboldened by hearing our chosen facts and beliefs reverberating around cyber space, have become increasingly polarised and uncompromising in our protest. 

The Trumpy Corbynites

Which brings us to Labour. Despite the obvious political differences between Jeremy Corbyn and Donald Trump, there are striking similarities in the movements which have coalesced around them. For many of their supporters, they can simply do no wrong; each criticism provides further evidence of a corrupt establishment’s conspiracy against them; rivals, including those who share many of their beliefs, are anathematised; unbelievers are pursued across the internet; inconvenient facts are reinterpreted or ignored; rational, civil debate is shut down or drowned out. 

There are other similarities in these insurgencies: both mistake slogans for policies and mass rallies for popular support; both are overwhelming and quite possibly destroying their own parties – and both, ultimately, are movements without practical purpose.

Trump may give vivid expression to his followers’ grievances but, other than building a wall along the Mexican border, his plans for government are obscure. Similarly, while Corbyn and his supporters know what they’re against, they have not yet articulated a clear vision of what they’re for, much less how it can be achieved. For many of them, it is enough to be "anti-Blairite". 

But in disassociating themselves from a Labour prime minister’s mistakes, they are also dismissing their party’s achievements under his leadership. Their refusal to acknowledge the need for compromise may well enable them to avoid the pitfalls of government. But government’s potential to bring about at least some of the change they want does not come without pitfalls. In wanting it all, they are likely to end up with nothing.

The art of compromise

Democracy cannot be sustained simply by what passionate people oppose. And though movements such as Momentum have important roles to play in influencing political parties, they cannot replace them. Their supporters want to be right - and they often are. But they are rarely prepared to test their principles against the practical business of government. The members of political parties want, or should want, to govern and are prepared, albeit reluctantly, to compromise – with each other, with those they seek to represent, with events -  in order to do so. Parties should listen to movements. But movements, if they are to have any practical purpose, must acknowledge that, for all its limitations, the point of politics is power.

We have to trust that the majority of American voters will reject Donald Trump. But closer to home, if Labour is to have a future as a political force, Corbyn’s supporters must learn to respect the historic purpose of the Labour party at least as much as they admire the high  principles of its current leader. There isn’t long for that realisation to take hold.

In the UK as in the US and elsewhere, we need to rediscover the importance of common cause and the art of compromise in forging it. The alternative is a form of politics which is not only post-truth, post-reason and post-purpose, but also post-democratic. 

Peter Bradley is a former MP and director of Speakers' Corner Trust, a UK charity which promotes free speech, public debate and active citizenship.