INTERVIEW: Citi Expert Says West Faces Politics Of Slow Growth

Tom Burroughes

7 January 2013

Whatever else one can say about 2012, one thing is certain that the focus on politics as a key issue for wealth managers and their clients has increased. The days when people assumed that history had ended and life would be about the inevitable triumph of market liberalism look to be over.

For Tina Fordham, a senior political analyst at Citi, the last 12 months have seen the surge in what she and her colleagues refer to as “vox populi risk” – referring to the rising political volatility of nations, increased demonstrations and social strife.

“The state has returned; citizens are experiencing deteriorating living standards and are concerned about the erosion of social safety nets,” she told this publication in a recent interview.

“When I started doing political research it was primarily about emerging markets. Since the financial crisis we have returned to the rise of political risk in developed markets as well as in emerging markets. This is new territory for investors under the age of 70,” she said.

Current events, as seen in the political wrangles in the US over the “fiscal cliff” issue, bear out this statement. The past year has seen a continued focus on the threat of a breakup to the eurozone; the US elections highlighted the polarisation of the US and its fiscal and economic problems. In Japan, a more assertive government was elected; in France, socialist Francois Hollande beat incumbent Nicolas Sarkozy, with the former raising taxes and prompting high-profile French citizens to flee. In Greece, there are fears of political extremism amid the austerity. In Spain, a country wracked by monstrously high youth unemployment, there are mutterings of secession by regions such as Catalonia. There is the risk of an escalating spat between China and Japan over some tiny islands in the East China Sea. And then there is the Middle East.

Guiding clients

Fordham brings plenty of experience to her role. She joined Citi in 2003 and once worked as an adviser in the UK prime minister's office. She is based in London and is a native of northern California. Fordham is an associate fellow at Chatham House and a member of the World Economic Forum's Global Agenda Council on Strategic Foresight.

She is in demand. Fordham and her colleagues spend time educating clients about such risks and how to take account of such developments when framing their investment policy or approach to certain countries and asset classes. Her work has never been more sought after, she said. Fordham's insights are shared across the firm, including Citi Private Bank.

“Political analysis research is consistently in the top three forms of research read by clients in our banks,” she said.

This is unlikely to change soon, Fordham said, because one of the underlying reasons for the rise in political risk in developed countries such as parts of Western Europe, is slow economic growth and the rising strains on decades-old Welfare States.

“In our work here, we think what we are looking at is more than a change in elections and a more significant recalibration between the government, the individual and the market,” she said.

Approval ratings can fall sharply; six months after the election of Francois Hollande as president of France, for example, his approval ratings have sunk by about 20 percentage points.

“We are looking at the politics of slow growth,” she added.

Economic growth – in the West at least – may indeed be slow. But if recent trends continue, demand for Fordham’s expertise, and for that of other risk analysts in similar fields, is likely to be anything but slow.