Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that is already weak and fragile. The sentiment toward less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible o sudden swings in investor sentiments, as shown by recent news over Deutsche Bank AG’s financial health.
The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation. There are also growing signs that the union and Britain are heading for a “hard exit” that would sharply reduce trade and financial ties between rest of EU and Britain. U.K. Prime Minister Theresa May said on Oct. 2 that she’ll begin her country’s withdrawal from the EU in the first quarter of next year.
Looking abroad, recessions in Brazil and Russia are set to come to an end, and in the U.S. cutbacks in inventories and in oil and gas drilling will wane. The boost to help drive the global economy will come from a lessening of drags rather than from a big burst of fresh growth.