As we discussed last month, policymaking has been intentionally globally synchronized in the post-pandemic era (even much of the post-Global Financial Crisis era). That includes monetary, fiscal, climate, social, and public health policy.
But that global synchronization has broken, with the "populist" political shakeup in the U.S.
And the new, more nationalist policy path taken by the U.S. has almost immediately been reflected in this chart of business sentiment (U.S. relative to Germany) …
This divergence is about pro-sovereignty, pro-growth and deregulation vs. diluted sovereignty, slow-to-no growth and excessive regulation.
It's about optimism versus pessimism.
And with that, we talked about the prospects of a populist political shakeup spreading, globally (with Trump-like candidates/policies).
It's brewing in Europe.
And with a big snap election this Sunday in Germany, the populist (AfD) candidate is polling around 14 points behind the favored CDU candidate, but has been effective in galvanizing pushback against the government overreach and policy failures of the incumbent regime.
Let's take a look at German stocks as we head into this weekend's election.
Despite the gloomy German business sentiment we observed in the first chart, and despite posting a second consecutive year of contracting economic growth, German stocks have been on a tear, making new record highs, almost by the day, since late December.
But the DAX put in a bearish technical reversal signal yesterday (an outside day).
