Hungarian Autocrat Roils Market

Viktor Orban, Hungary’s long-serving Prime Minister, has taught us once again why political change is a good thing. Mr. Orban will be celebrating 12 years in office on May 29th and recently won re-election, so he will remain in charge for the foreseeable future. To celebrate his extended grip on power, his government on Tuesday announced a state of emergency and assumed emergency powers, essentially allowing him to rule by decree. The rationale for the latest state of emergency declaration (also instated for Covid and the European immigration crisis) is the War in Ukraine. Interesting that he would feel the need to do this as his Fidesz party controls two-thirds of parliament. One of his first acts was the imposition of a windfall profits tax on Hungarian corporates for 2022-23 to help reduce the budget deficit. This was not well received, with MSCI Hungary down over 6% since the announcements. We believe that the longer a person or party remains in power, the more their policies are geared toward retaining power, whether they are good for the populations they serve or not. Since taking office 12 years ago, MSCI Hungary’s performance is -16.8%, while MSCI EM has returned +11.2%. Autocrats are usually not good for equity market returns.