EFTA01384477

18 September 2017 Long-Term Asset Return Study: The Next Financial Crisis Figure 56: Populism index (90 of vote across key countries, population weighted, LHS) and DM Financial Crises (RHS) 40% 35% 30% 25% 20% 15% 10% 5% 0% EWE DM Shocks I% of Countries. RHS) Popubcrn index vole share, LHSI § § 1, VF :63 §g? § 0 § 9 „gg San Onion 6✓4A0'd'9fMlbdlr 6a CaNCNOM311.7700cen. ea fa, arab Inoldel2 *ON 100% eook 90% 70% 60% 50% 40% 36% 20% 10% 1. Tani S re Grans,. SWAM beenven /Mind 190as Men se s• dassealen ofpwIlaIneni PM Mal [parry ternd✓AV air Wain crell the Int Orem sly 2 And et) kiln Einktn as basin 1924 dird 1946 as ne dendealle eleaWel PM Abe* ate erne Malt ternidaehe 'WOW ahl, V tart if ateCtell 3 An u reSpent* Malan SS belineel :936 ard tin (Le re ChM merman albino, to power a • Malay Peace unlit* Span.. Mode mita 1I There Mesa • On doable dna on Mit 0967/097i gate! *Nan So while the consequence of the recent rise in populism hasn't yet destabilised financial markets, the level of uncertainty will surely remain high while such parties remain realistic power brokers in major national elections. Prior to the last decade, the only comparable rise in populism started in the 1920s and culminated in WWII. So although populism has proved unpredictable in recent years, the rise surely increases the risks to the current world order and could set off a financial crisis at some point soon. Where populism has already claimed victory in a national election, there are ongoing risks. We'll touch upon Brexit later but the Trump Presidency certainly contains risks to the current world order. Before we touch on the negatives we should stress that a successful tax reform and de-regulation agenda could improve US growth in the medium-term and actually reduce the risks of a crisis or reduce the impact of an external one. However there are also risks. Indeed it's possible that Mr Trump could decide to force the military option with regards to North Korea which could de-stablise the region and cause great friction in its relations with China. The handling of such a situation is of greatest concern when assessing the impact on markets. Linked into this any trade spats could also be a shock to global growth if handled clumsily. In summary the usual international diplomacy that surrounds major tensions seems less likely to occur with Mr Trump. That surely increases the risks of a more extreme event. Deutsche Bank AG/London Page 51 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0084700 CONFIDENTIAL SDNY_GM_00230884 EFTA01384477