The day after #8 - Deglobalisation could improve diversification but also exacerbate financial contagion

Tuesday 23 June 2020

In recent years world trade dynamics have definitely shown an accentuated inversion of the globalisation trend and its robust contribution to global economic performance. The Great Financial Crisis (GFC) marked a historic turning point in the degree of global economic integration. Since 2007/08 global trade has entered a period of increasingly protectionist policies (trade barriers, national subsidies, national champions), decelerating growth in trade-intensive sectors, rising policy uncertainty and more recently, trade tensions. A compelling example of this reversal in the globalisation trend is shown in Figure 1: the evolution of foreign direct investments since 1970. Foreign direct investments have decreased by 60% since their peak in 2007. Cross-border financial flows have experienced a similar trend (Bordo, 2017)...

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Vignette H2 2020 Investment Outlook

H2 2020 Investment Outlook - Investing during a de-freezing cycle

The Covid-19 crisis drove the global economy into an unprecedented deep freeze in the first half of 2020. The combination of monetary and fiscal stimulus will help the global economy de-freeze in H2. As was the case with the virus cycle, the recovery will be sequential and involve different regions at different times - on a ‘first in, first out’ basis - and will depend on the size of the policy response. As the global economy gradually de-freezes, investors will turn their focus back to geopolitics. The climax will be the US presidential election – the outcome of which appears increasingly open. It will influence the US vs. China dispute, which will shift from trade to technology and healthcare supremacy – and more broadly -- the new geopolitical order and the role of Europe within it. In Europe, we are monitoring the budgetary process and the recovery plan. This could redesign the future of Europe towards more sustainable and equal growth, the upcoming end of Merkel’s political era, Brexit and the response of the ECB to the German constitutional court, due in August.