NICK VAN RENSBURG: Many market assumptions are no longer valid
Geopolitics matter, fiscal policy is more powerful and risk-free US assets may not be risk-free in future
We believe many embedded market assumptions are no longer valid. For decades, geopolitics was mostly irrelevant; interest rates were broadly falling; companies sent factories to China, which kept inflation and wages low while boosting profits; we lived in a unipolar world dominated by the US and with global trade protected by the US navy; and social media was a mere distraction, while monetary policy served as a market tailwind.
Today, geopolitics is relevant — we have a great power competition between the top two economies. Interest rates are higher; supply chains are being moved from China to other emerging markets and the US; we worry about the cost of climate change; social media has influenced voter behaviour, which in turn threatens democracy; and fiscal policy has superseded monetary policy since 2020. The effects of rapid progress in artificial intelligence (AI) add new uncertainty...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.