Global: Globalisation and populism
Globalisation was not a perfect process. While it hefted living standards emerging markets, the trade-off was a stagnation of incomes in the advanced world. That’s what created that ‘left behind’ feeling that the populist narrative has engaged so effectively. Globalisation also happened simultaneously with a trend towards worldwide deregulation and corporate tax avoidance. Trade barriers cannot rectify these problems. Any reversal of globalisation is bad news for equities. Against a backdrop of tighter global liquidity it’s likely to be a testing time for emerging markets. This theme is supportive of the dollar more immediately. We’re long versus the euro. The impact on rates is more nuanced. Inflation risks and a normalised economy will keep the Fed tightening. But the risk of going too far is now much higher. We would be long 2-year Treasuries around 3.0% to reflect this.