Five macro trends set to shape the next decade
Gulf Business|January 2021
From the end of the neoliberal era to policy intervention, Yves Bonzon, group chief investment officer of Swiss wealth manager Julius Baer reveals the macro economic trends expected to mark the biggest future shifts in the economy
Yves Bonzon

The coronavirus pandemic has been a tremendous accelerator of the secular trends we predicted back in December 2019. One thing is clear – 2020 marks the end of the neoliberal era, exemplified by extreme monetarism and austerity. In advanced economies, the coming decade will be about fiscal dominance and unprecedented policy intervention in the real economy and financial markets, blurring traditional market signals and thereby reinforcing the importance of a robust strategic asset allocation based on established macro economic trends.

BIPOLAR SINO-US WORLD

The divide between the US and China continues to grow. While trade issues seem to have been put on the backburner, there are continued hostilities between the two countries on other fronts. The most notable subject is the coronavirus, as China is being blamed for the pandemic getting out of hand. With Joe Biden in the White House as of January 20, Democrats might tackle the conflict in a more diplomatic manner and give a greater importance to human rights issues, but the overall hawkish strategy should remain unchanged, if not strengthened.

As China ploughs ahead with the aim of restoring the nation to its previous glory, this 21st century cold war over economic, technological, and military supremacy will usher in a new dual world order, with separate economic and financial cycles and technological ecosystems. In this context, the benefits of international diversification are revived after having been significantly undermined by globalisation, giving investors reason to own both US and Chinese assets in their portfolios.

The emergence of a bipolar Sino-US world and the rise of China are of special interest to investors from the Gulf region – in a world with declining interest rates and scarce growth, it is more important than ever to have exposure to regions and sectors which can still deliver positive real returns. China, and Asia more generally, is a hub of growth and innovation, with ever-growing and deepening financial markets, and is set to become the largest global economy this decade.

UNORTHODOX MACROECONOMIC POLICIES

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