Much has changed since then. This is not simply because of the 9/11 attacks on New York and Washington DC, although those attacks, and conflict in the Middle East, certainly increased tensions across the board. Political risk – defined by growing uncertainties about the outcomes of elections and policies, as well as rising taxes and regulations – is back for many reasons. And this time, developed countries rather than emerging market nations are in the limelight.

So argues Citi senior political analyst Tina Fordham. She joined Citi in 2003 and once worked as an adviser in the UK prime minister's office. Based in London and a native of northern California, she has recently been busy producing reports for advisors and clients about issues such as the prospects of heavy losses for the ruling Democrats in the mid-term US elections; political woes in Greece and coalition government marriage pains in the UK. And although other bank analysts keep an eye on the political climate, she says her bank is almost unique in providing wealthy clients with dedicated, in-house analysis and commentary on political risks – and opportunities.

For the end-client, political risk analysis is valuable because an understanding of what is happening is essential for wealthy individuals considering how to advance their business interests and investments, she told WealthBriefing recently at her firm’s offices in London’s Canary Wharf. She pointed out, for example, that such risks are particularly relevant to clients with assets in different countries, as is often the case.

“In a time when political risk and uncertainty has returned to markets in a way in which most people haven’t seen for a lifetime, it is a no-brainer to offer this from an in-house source raises the overall quality and completeness of the advice we provide. It emphasises also the global nature of our reach,” she said.

New abnormal

A key switch since the 1990s is that political risk is often more of an issue in developed than emerging market nations.

“A lot of emerging market countries are led by people winning elections by wide margins and maintaining high approval ratings for longer; that is a great amount of political capital and makes such leaders the envy of their developed world counterparts,” said Fordham.

Political risk is rising for various reason in the post-crisis environment:

- Greater government intervention in and control over the economy and markets, which makes it more necessary to track what leaders and policymakers say and what they can actually implement;

- Currency conflicts, such as between China and the US;

- Greater polarisation in US and European politics and society, (as evidence, the Tea Party movement highlighting anti-establishment sentiment in the US and right-wing and populist parties in Europe in part responding to concerns over immigration and disgust with politicians in general);

- The credit crunch, which has damaged the “Washington consensus” on free markets, a declining consensus on free trade and globalisation as positive trends, and a decline in multi-lateral co-operation.

If heightened political risks remain, one can expect other private banks to provide more analysis of the issue. Like it or not, rising government intervention, G20 attacks on so-called tax havens and political polarisation is making political risk a factor which high net worth clients need to factor into their decisions. A whole generation of investors who did not experience the inflation-hit 1970s and often tumultuous 1980s have found recent events to be a nasty shock. It may be some time before the “great moderation” enjoyed by Clinton and his contemporaries returns.