HAS GLOBALISATION PEAKED ?
Globalisation has always been a matter of controversy, it has been widely credited with a rise in productivity by exploiting gains of trade.
- Globalisation has been widely perceived as boon and bane: It is credited with a rise in productivity, higher growth, rising standards of living in EM economies and wider choices for consumers, but also blamed for de-industrialisation in the Western world and rising inequality.
- Economically, globalisation may have hit a “natural limit” as technology makes wage differentials a less important driver of production off-shoring. Politically, rising inequality has become a ramp for protectionism. Both forces let us to believe that globalisation has peaked. The COVID-19 outbreak will only accelerate the slowbalisation already underway.
- Protectionism and trade frictions tend to increase political uncertainty, thus enhancing the volatility embedded in the equity risk premium and valuations. Future earnings growth and total returns are expected to be lower than in the last 20 years.
- Countries with higher participation to the global value chain – EU and EMs – are more exposed to these tectonic shifts. Investors will cherish high growth, patent-protected and technology-oriented stocks.