On Big Wave Surfing With Rodrigo Koxa & Italian Populism

Eighty feet!

That is the height of a recent wave off of the coast of Nazaré, Portugal that professional big wave surfer Rodrigo Koxa successfully surfed to earn himself the Guinness Book World Record for largest wave ever surfed.

In an interview at the World Surf League award presentation, Koxa put his accomplishment in some perspective: "I've tried to surf big waves all my life and I had a huge experience in 2014 where I almost died at Nazaré…Four months later, I had bad dreams, I didn’t travel, I got scared, and my wife helped me psychologically."

He obviously recovered. Check out the insane footage of his record breaking ride here. Eighty feet! That is a beast of a wave.

Another big wave that doesn't seem to break is populist movements that have been sweeping the global geopolitical system since mid-2016. What is populism? The best definition we’ve heard is from a political-minded colleague: the movement organized and energized by "the people" against the "corrupt and privileged elites" who represent the political order of things. The goal of the people is to overturn political and economic institutions to better society.

Starting with "Brexit" in June of 2016, the wave rolled through political elections in the U.S. (the election of President Donald Trump, a noted outsider) and Germany (Merkel's coalition government includes a populist party), while France and the Netherlands had serious populist challenges. Elections that will be held later this year in Brazil, Mexico and the Philippines will all incorporate well-polling populist challengers.

Up until recently, capital markets have been sanguine in response to the wave. That changed recently with the latest political turbulence in Italy, which sent European equity markets lower and bond yields higher.

The Italian political crisis was stirred up by European Union-imposed austerity, lackluster economic growth, an unstable banking system, migrant hysteria and a particularly contagious strain of European populism. The initial catalyst was when the Five Star party (an anti-establishment, Eurosceptic movement led by former clown comedian Beppe Grillo that has been gaining popularity mainly over the past five years) received a plurality of the votes in the parliamentary election held on March 4th.

However, the party did not receive a simple majority, so Five Star has been attempting to form a coalition government with the League Party (a right-wing party whose anti-globalist and anti-immigration stances are well aligned with Five Star) for some time. A central tenet of their attempted alliance was the installment of Eurosceptic economist Paolo Savona as Finance Minister. However, Italian President Sergio Mattarella vetoed his nomination, stalling the formation of the coalition government; hostility between the tentative coalition and the president soon led to further political discord, and the process to remove the pro-Eurozone prime minister ensued.

Fortunately, the political hostility appears to have been tempered, calming European capital markets. A slightly more open-minded economist, Giovanni Tria, was selected for finance minister, satisfying both the coalition government and the president. Five Star has walked back the scope of their anti-EU demands. The two coalition parties again appear to be committed to hashing out an alliance, which would likely bring some stability back to the Italian government. Concerningly, though, Italy’s upcoming election in July may reverse any near-term progress.

Good news for investors, equity markets tend to "discount" bad news ahead of actual events in a classic "shoot first, ask questions later" approach. As a result, further bad news—if it may come—may not cause severe capital market disruption in the future.

Surf’s up!

Contact Russell Moenich to learn more about this topic.
330.255.4330 | rmoenich@sequoia-financial.com

 

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