Thurs, OCT 20th, 2016
Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.”
“I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
– Lewis Carroll, Through the Looking-Glass
Negative interest rates, driverless cars, unfathomable campaign statements, a decline in NFL viewers… Lewis Carroll foreshadowed much of what we see today in the realm of “impossible things”.
Has the world gone crazy?
No. But we are in a time when the pace of change is accelerating, and when anything perceived to be offbeat and interesting – regardless of how rare (or real) it is – goes viral in moments. We’re constantly reacting to crazy events and almost never have time to comprehend the repercussions before the next wave crashes.
Topping the list of big wave events for market observers are both the pending U.S. election cycle and Britain’s exit from the European Union (EU). On June 23, 2016, the UK voted to leave the EU. While it was a sharp shock, markets quickly recovered as it became apparent the divorce would be a long process. Primary drivers of Brexit include security concerns (as there was no way to screen foreigners entering the country) as well as discomfort with immigrants competing for jobs. There was also a cultural element: many Brits felt like their longstanding cultural norms were being irrevocably diluted.
In recent weeks, the rest of the EU has made it clear they intend to take a hard line. They will not allow Britain to keep the parts of Brexit they like – free access to the European market – while rejecting the parts they don’t like – contributing to the EU budget; being subject to the EU Court of Justice; and accepting the free movement of labor.
In the US, we have a similar dynamic at play. At risk of oversimplification, our Republican candidate speaks directly to concerns of those who believe foreign immigrants pose unfair economic competition to U.S. workers, a security threat to the nation, and a dilution of our national norms. His proposed solution hearkens back to pre-World War II attitudes toward disengagement with other countries, a message that resonates for a significant portion of our population. Our Democratic candidate acknowledges these same concerns but proposes a different solution. Her path forward involves increased acceptance and cooperation among various groups both domestically and internationally.
The issues our country faces are multifaceted and rarely amenable to simplistic solutions. Nomenclature such as “free college” and “take their oil” really does not acknowledge the cost and complexity of higher education or the challenges inherent in the Middle East. Yet our political process demands simple messaging to break through. A study by Carnegie Mellon University’s Language Technology Institute finds most candidates use grammar and words typical of 6th to 8th graders. It is difficult to convey complex issues without the use of complex language.
Despite these concerns, we remain optimistic. Our government does have a series of checks and balances and while change does happen, it tends to happen at a rate that our economic system can absorb. The “impossible” waves keep crashing on our consciousness but most will pass by harmlessly.
“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
― Lewis Carroll, Through the Looking Glass
John Bird, CFA®, CFP®, MBA / President, Principal and Co-Founder
Albion Financial Group