More than 120 politicians have been murdered since serious campaigning got underway late last year, underscoring the notion that Mexico is truly engaged in a “drug war,” one defined as much by battles among competing drug cartels and between corrupt and non-corrupt politicians as between state authorities and criminal gangs.
Italian assets continued to take a hit as we went to press in May, with the government’s two-year note – the debt instrument most sensitive to changes in political risk – being slammed the hardest, rising to its highest level in four years, breaking through 2.7% for the first time since 2013. The longer-dated yield on the Italian 10-year note reached 3.38%, up about 70 basis points from the previous close.
As we were wrapping up our March ratings and forecasts, developments affecting North Korea were gaining steam. Just weeks before a scheduled April 27th meeting between Kim Jong Un and South Korea President Moon Jae-in – to be followed presumably in May by a get-together with President Trump – the North Korean leader railed into Beijing to see China’s Xi Jinping. The meeting between the two Asian leaders is instructive insofar as it presents an entrée into the interests of each of the parties.
Low volatility in equity asset prices – for emerging and developed markets – and the relatively benign impact of political risk in 2017 on a range of asset classes was a major theme for most in the investment and business world. There is a cyclical nature to this as volatility moves in longer-term waves, punctuated by spikes and drops along the way. In 2018, PRS is looking at higher lending rates in the US and later elsewhere. The end of quantitative easing has begun in the US, with the Fed saying it will reduce its balance sheet by about $450 billion by the end of the year.
For many, it was an event long time in coming, as Zimbabwe witnessed the end of the Robert Mugabe era. The 93 year-old Mugabe had ruled the country since independence in 1980. The chain of events is well-known by now: On November 14th, the military seized control of the country, taking over the state broadcasting and the capital’s main thoroughfares. The official line for the action was to target criminals near Mugabe who were “committing crimes [and] causing social and economic suffering…”