Docklands Bombing, London, 1996. Fair Use. Source: Wikipedia
There’s a general sense in the markets that we have achieved a peaceful equilibrium, that war and destruction are something that is happening “over there,” and that – at least among developed nations – democracy and dialogue have won out over violence and bloodshed. But there’s no law of nature that makes this so. And it wasn’t so long ago that London faced a significant terrorist threat.
“The Troubles” – that typically British understated term – started in the late 1960s and were concluded with the Good Friday Agreement of 1998. Although they primarily took place in Northern Ireland, the violence also spilled over into the Republic of Ireland, England, and continental Europe. At their heart, The Troubles were about minority rights and self-determination in Northern Ireland, a conflict between unionists who wanted Northern Ireland to remain part of the United Kingdom, and nationalists who wish to leave the UK and join with the rest of Ireland.
We tend to forget how disruptive The Troubles were, but 3,500 people were killed and over 50,000 injured in the conflict. Riots, bombings, and shootings took place in Belfast, Dublin, Manchester, Brighton, London, and many other cities. The British House of Parliament was bombed. There was even a mortar attack on Ten Downing Street during a cabinet meeting.
“Sniper at Work.” Photo: Liam Galligan. Source: Wikipedia
The Good Friday Agreement largely put an end to the violence 20 years ago, but the Brexit vote, recent UK election, and new developments in Belfast are worrisome. The Northern Ireland Assembly selects government ministers in a power-sharing arrangement, but in January the largest nationalist party, Sinn Fein, withdrew from the governing coalition. The assembly stopped meeting and the government stopped working. Last weekend Gerry Adams, the leader of Sinn Fein for the last 35 years, has announced he is stepping down at year end. Adams is 69 years old.
This is a problem. Northern Ireland is at a crossroads. Brexit means the free movement between Ireland – a member of the European Union, and Northern Ireland – part of the UK – will be restricted. And in the latest UK parliamentary election, the Tories were so weakened that they had to partner with a unionist party to retain power. That can’t make the nationalists happy. Resolving the challenges arising from Brexit, UK politics, and other factors will take creative, visionary leadership.
If the British and European economies and markets are disrupted by a regional conflict that spirals out of control, it wouldn’t be the first time. It’s happened before. Investors should not be complacent.
EWU: UK Exchange Traded Fund. Source: Finviz
Douglas R. Tengdin, CFA