A quiet but revealing report has crossed my desk, sourced from a British intelligence unit tasked with monitoring foreign disinformation. Their target? Not a Kremlin bot farm or a Beijing proxy, but the Twitter feed of a former American president. The conclusion is as stark as it is uncomfortable: Donald Trump’s online behaviour represents a systematic erosion of democratic norms, measured not in opinion but in pattern analysis. For those of us who watch markets, this is not a political verdict but a risk assessment. Democratic institutions are the bedrock of economic stability. When those norms fray, investors notice.
The analysis, conducted by a team of behavioural analysts and data scientists, examined over 10,000 posts spanning Trump’s presidency and post-election period. They coded each post for indicators of anti-democratic sentiment: attacks on electoral integrity, praise for authoritarian leaders, incitement of violence, and delegitimisation of the press. The findings show a clear escalation. In 2016, such posts comprised roughly 8% of his output. By 2021, that figure had tripled. This is not randomness; it is a calculated strategy of norm erosion.
But why should a British financial editor care? Because democratic backsliding carries a price tag. Look at the gilt market during the 2020 election litigation. Uncertainty spiked volatility. Look at the dollar during the Capitol riot. Capital flight to safe havens was immediate. The Trump phenomenon is not merely American; it is a systemic risk. The British unit’s report notes that Trump’s rhetoric has been replicated by populist leaders in Eastern Europe and Asia, creating a contagion effect that undermines trust in institutions. Trust, in financial terms, is liquidity. Without it, markets seize.
The report identifies four key patterns: first, the persistent use of “the big lie” about election fraud, which has now been absorbed by 70% of Republican voters according to polls. Second, the personalisation of political attacks, turning policy disputes into vendettas against individuals. Third, the dismissal of independent media as “enemies of the people”, a tactic that destabilises the fourth estate’s role as a check on power. Fourth, the flirtation with violent rhetoric, such as “when the looting starts, the shooting starts.” Each pattern, in isolation, is concerning. Together, they form a playbook for democratic decay.
Investors should take note. The UK’s intelligence community does not engage in partisan analysis. Its concern is national security, which includes economic security. If a former US president can erode norms with a smartphone, what happens when the next global crisis hits? A loss of confidence in democratic processes is a slow-burn crisis, but it compounds like interest on subprime debt. The report’s authors recommend monitoring social media for early warning signs, but the real question is: what is the market’s risk premium for democratic erosion?
I would argue it is underpriced. Since Trump left office, the S&P 500 has rallied, but the VIX remains stubbornly above pre-2016 levels. Corporate bond spreads have narrowed, but political risk indices have not. The pattern of norm erosion is not priced in because it is hard to quantify. Yet the British report offers a quantifiable metric: the frequency of anti-democratic posts. If this rises again in 2024, expect a flight to quality. Gold, the Swiss franc, long-dated gilts. The usual havens.
Of course, cynics will say this is overblown. But I have spent two decades watching markets misinterpret political risk. They ignored Brexit until the night of the referendum. They dismissed Trump until the 2016 election. The pattern is clear: markets are late to politics. The British intelligence report is a canary. It does not predict a coup or a collapse, but it maps a trajectory. For a financial editor, that is enough. When the trajectory points down, you adjust your portfolio. Democratic norms are not a luxury; they are an asset. And assets can be devalued.
