US and European politics are entering a new and much more dangerous phase that has major consequences for the global economy and markets. US President Joe Biden's disastrous performance against Donald Trump on June 27, followed by the taken by the far-right party of Marine Le Pen in the first round of France's parliamentary election on June 30, have propelled political risk to the top of the list of investors' concerns [eddb14f2]. In prediction markets, Trump is a shoo-in to win the presidential election on November 5. Moreover, investment banks have begun to focus on the implications of Trump's economic and trade policies. In France, President Emmanuel Macron's controversial decision to call a snap parliamentary election in the hope of arresting the momentum behind the far-right has backfired. The National Rally (RN), Le Pen's party and its allies, not only won about 33 per cent of the vote in the first round, giving it a shot at winning an absolute majority in the run-off on July 7, a left-wing alliance dominated by hard-left parties came second with 28 per cent of the vote. French stocks and bonds have come under pressure amid concerns about a post-election populist spending spree that would put France on a collision course with the European Commission. While investors are paying more attention to political risks in the US and euro zone, they have yet to recognise the gravity of the populist-nationalist threat. Biden's own team about his fitness to run for re-election, let alone govern for another four years. The politicisation of US institutions, in particular the by the Supreme Court on July 1 to grant Trump a large degree of immunity from criminal prosecution over his efforts the 2020 presidential election results shows how dangerously partisan the court has become. Investors are trivialising the economic consequences of a second Trump term. Restrictive , 10 per cent tariffs on all imports and a 60 per cent levy on goods from China would be to US and global growth, eliciting stronger countermeasures from Beijing. Although Le Pen's party is unlikely to win an absolute majority in Sunday's run-off, centrist politics in the European Union's second-largest economy has been crushed. A populist and Eurosceptic France will make it much more difficult for Europe to respond to China's competitive threat. US and European politics, while garnering more attention, are still a sideshow for markets. This is a huge misjudgment of risk, one which some investors are belatedly recognising.