Some Strategists Say Get Ready for ‘Peak Decade’
Amid the Alpine peaks of the Swiss resort of Davos in the week ahead, politicians, investors and executives will be busy debating whether we are witnessing peaks in key drivers of the world economy.
From oil demand, car production and the proportion of young people as a share of the population, to less-measurable themes like globalization, inequality and central banking power, there’s an argument each will ebb in the 2020s.
The IMF sees tariffs taking their toll on global trade growth
Strategists at Bank of America Corp. are already telling clients to brace for a “ground-breaking ‘peak decade’” that will disrupt business and investing. Ian Bremmer, a delegate at the World Economy Forum’s annual meeting and founder of Eurasia Group, describes this year as a “tipping point.”
The theme is captured throughout the Davos program, which contains multiple panels on “stakeholder capitalism” and tackling inequality. Participants will also discuss the future of globalization and whether central banks are out of ammunition.
Here are the hot talking points:
The era of people, goods and money flowing increasingly unchecked around the world may have passed its high point as governments pursue protectionism and erect more obstacles to migration. Already there are around 77 physical barriers delineating international borders compared with 15 in 1989 after the fall of the Berlin Wall, according to Bank of America. The World Trade Organization calculates the pace of growth in international commerce fell below the rate of economic expansion in 2019 for the fifth time since the financial crisis. Foreign direct investment inflows have been on the decline since 2015, says the United Nations.
The U.S.-China trade war is at the center of the shift. But even with the signing of an interim deal, the Peterson Institute for International Economics reckons the average U.S. tariff on imports from China is still 19.3% versus 3.1% at the start of 2018.
Away from Beijing, Trump is also seeking to remodel the World Trade Organization and potentially clamp down on European auto exports. The U.K. still needs to strike a post-Brexit trade deal with the European Union.
Still, the continued development of the digital economy, rising tourism and mounting reliance of companies on revenues generated outside their home market provide room for confidence globalization is evolving rather than ending.
Source: Enda Curran | Bloomberg