Filipino and Northern Irish Voters Went to the Polls

Editors’ Note: MarketMinder favors no politician nor any political party, assessing developments solely for their potential market and economic impact.

Hot on the heels of April’s French presidential election, May is shaping up to be quite a busy month in international politics. Not only does Australia hold its general election in a week and a half, but Northern Ireland and the Philippines held some widely watched contests in recent days—and the results are still stealing headlines. What do we make of the latest news from an investment standpoint? Read on.

Northern Ireland’s Non-Vote for Reunification

In the days since last Thursday’s election for Northern Ireland’s devolved parliament, most commentary has focused on the Irish nationalist party Sinn Féin’s “win” and the potential for a referendum on a united Ireland. Never mind that while Sinn Féin won a plurality of seats in the Northern Ireland Assembly, its 27 seats match its results in 2017’s election. And never mind that unionist parties collectively hold more seats. And never mind that the party won not on nationalist rhetoric and the prospect of reunification, but on a left-leaning economic platform that focused on inflation. And never mind that fewer than half of Northern Irish voters presently support reunification with the Republic of Ireland. The simple fact that Sinn Féin would hold the First Minister position for the first time was enough to set tongues wagging.

The Brexit Impact

As it happens, there is a rather big political development stemming from Thursday’s results, but it has nothing to do with a potential referendum. Rather, it harkens back to Brexit and the Northern Ireland Protocol—the complex solution to keep Northern Ireland both within the United Kingdom and the EU’s customs union. You see, Sinn Féin gets to hold that First Minister position only if there is a government. The Good Friday Accords, which ended the conflict over British rule in Northern Ireland, mandate that every devolved Northern Irish government be a power-sharing administration of nationalists and unionists. The party with the most seats in the assembly gets to hold the First Minister position, but they must always govern in coalition with the opposition. This has led to long periods with no Northern Irish government.

That may be where we are headed now, for the Democratic Unionist Party (DUP), which holds 25 seats, has refused to join the cabinet unless the UK renegotiates or revokes the Northern Ireland Protocol. The DUP, which supports keeping Northern Ireland in the UK, has pilloried the new system for adding friction to trade between Northern Ireland and Great Britain (that is the island containing England, Scotland and Wales, for those needing a UK geography refresher), creating the perception that Northern Ireland is being peeled off from its fellow constituent countries. But Sinn Féin supports the Northern Ireland Protocol, which keeps trade frictionless within the island of Ireland—key to its nationalist aims. If the UK revokes the Northern Ireland Protocol, then Sinn Féin probably boycotts the government. Rock, meet hard place.

What will happen next is anyone’s guess. If there is no cabinet, then new elections must take place within 12 weeks. Several British outlets report UK Foreign Secretary Liz Truss could rip up the Northern Ireland Protocol next week, and on Tuesday she excoriated Brussels for what her government views as insufficient concessions to fix the present trade disruptions. Yet Tuesday was also the Queen’s Speech, in which the government sets out its legislative program for the current Parliament, and it didn’t mention the Northern Ireland Protocol. However, that doesn’t necessarily mean much, as legislation isn’t limited to items in the Queen’s Speech, and The Telegraph reports a bill featuring amendments to the protocol is written and could land in the House of Commons later this month.^[i]

So maybe the Northern Ireland Protocol will change. But how is the question. Perhaps the threats to rip it up—which Brussels warns will start a trade war—are a bluff and pave the way for a more comprehensive deal. Or perhaps Truss follows through and the UK makes unilateral changes. Maybe that invites blowback from Brussels, maybe it doesn’t. Either way, we don’t see much here that is new or surprising for markets, which have stewed over every possible Brexit outcome for years now. Most observers have long seen a trade war as a foregone conclusion. Everyone has seen the data showing UK trade with the EU take a hit. For stocks, surprise power here is basically gone—markets have probably long since moved on.

The Marcos Family’s Triumphant Return

The Philippines held presidential elections on May 9, and early (unofficial) returns imply the contest was a landslide win for Ferdinand Marcos, Jr.—better known by his nickname, Bongbong—and his running mate, Sara Duterte. If this were a television show, it would be called: “Politics Trek: The Next Generation,” as Marcos is the son of the former dictator who shares his name and Duterte is the daughter of outgoing President Rodrigo Duterte.

Most of the press coverage focuses on Marcos’s lineage, re-litigating his parents’ crimes and human rights abuses. It is quite reminiscent of the tone that pervaded when former Park Geun-hye—daughter of former dictator Park Chung-hee—won Korea’s presidency in 2012. Or when Keiko Fujimori—daughter of former dictator Alberto Fujimori—has run for Peru’s presidency in the past three elections. While we can understand that instinct from a sociological and historical standpoint, it is a prime example of pundits focusing on personalities, not policies. Stocks do the opposite and don’t really care about heads of state’s family trees. What matters is the degree to which legislative risk rises or falls, whether sweeping policies create winners and losers, and whether property rights and other key structural factors come under threat.

On that front, Marcos and Sara Duterte haven’t given the world much to go on. They ran largely on platitudes, didn’t participate in debates and didn’t present detailed economic plans. Perhaps that is partly why some recent surveys showed Philippine investors favored Marcos’ opponent, outgoing Vice President Leni Robredo.^[ii] But even if they had unveiled plans, we would take it with a big grain of salt, because the Philippines also held congressional elections Sunday. Those results aren’t in yet, so there is zero way to assess the likelihood that Marcos could push through legislation.

So about all we know now is that, at the presidential level, the results mostly extended the status quo. Marcos aligned his movement with Rodrigo Duterte’s and pledged to largely extend his predecessor’s policies. Sara Duterte is reportedly not close to her father and wasn’t part of his administration, but when she succeeded him as mayor of Davao—one of the country’s major cities—she didn’t radically break with his policies. So while pundits might not see the incoming team as markets’ “preferred” choice, they do seemingly represent the continuation of a political backdrop that Philippine stocks became familiar with years ago.