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How are investors tackling the issues of de-globalisation and the impact on their portfolios?[vc_quotes layout=”accordion” 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title=”Speakers” el_class=””][vc_quotes layout=”accordion” 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title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
Kate
One of the mistakes we made at the Bank of England was that we thought the GFC would be over more quickly and we thought we could fix it on our own.
The GFC wasn’t really a global crisis. This time the crisis truly is global, and it’s more important that we get it right.
Central banks are less relevant in the pandemic because this is not a banking crisis. Thus far, policy response has broadly been viewed in a favourable light. Going forward policy may be less popular which will provide a significant challenge. Central banks will be concerned about the potential for stagflation
Do we really need the government to play a bigger role? The private sector has been remarkable throughout the crisis and they should not be taxed out of existence or prosperity to pay for the stimulus measures.
James
This is the most difficult investing period of my 30-year career because there is so much uncertainty. Monetary policy is a blunt instrument and has probably reached its peak effectiveness. This contributes to significant policy risk.
We shouldn’t be debating MMT, we should be debating the governance around it.
It is easy to talk about building a portfolio that is resilient enough to withstand any environment but this is getting harder and harder.
Given that many defensive assets don’t earn a sufficient return, balancing portfolio resilience and return can be problematic.
Olivier
There is much cause for pessimism:
Asset classes are exhausted and expensive in part because our frame of thinking is outdated.
Trust between nations is one of the most problematic issues.
We have realised that we have been short-changed by China.
We will have to choose between the US (who are letting us down) and China (who will not be a better master than the US).
Civil unrest continues and populism remains to be about me, me and I.
The EU suffered through the GFC (even though it started in the US) and also through COVID-19 (even though it started in Asia).
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
Fraud and falsehoods are nothing new but technology has made it much more difficult to separate fact from fiction. Professor Stephen Kotkin discussed investing in a world of deception.
Are the two world powers on a collision course for war? Could global investors get smashed between the two? Unfortunately, the answers appear to be yes and yes.
There is growing recognition that globalisation has a downside. But whether they are mitigated, or continue on the current course, investors should be looking to safeguard their portfolios.
The implications for investors of the inclusion of China A-shares in the wider MSCI indexes, an inevitable outcome, will be discussed at the Fiduciary Investors Symposium at Yale in October.
Geopolitical risk is largely priced in to markets according to the John P. Birkelund ’52 Professor in History and International Affairs at Princeton University, Stephen Kotkin.
Former Governor of the US Federal Reserve, Ben Bernanke, says there are no foreseeable shocks to the financial system. In any case, he says, the system itself is so much more robust than it was before the crisis, that it could weather the storm. The only possible cause for concern is geopolitical risk. Risk
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