Daily Management Review

Anxiousness About Globalization’s Future Got Greater This Week


10/09/2016




Anxiousness About Globalization’s Future Got Greater This Week
A bevy of analysts have been led to redouble their warnings that a backlash over globalization is poised to roil global financial markets—with profound consequences for the real economy and investment strategies by weak global trade, fears that the U.K. is marching towards a hard Brexit, and polls indicating that the U.S. election remains a tighter than markets are pricing in.
 
Everyone seems to be pondering a future in which cooperation and global trade may look much different than they do now - from the economists and politicians at the annual IMF meeting in Washington to strategists on Wall Street trying to advise clients.
 
Global markets were overwhelmed by a strategy that's being dubbed a "hard Brexit" that suggests that the U.K. will prioritize control over its migration policy at the expense of open access to Europe's single market in negotiations to leave the European Union.
 
Chancellor of the Exchequer Philip Hammond during a television interview in New York on Thursday that the U.K. government is “strongly supportive of open markets, free markets, open economies, free trade.” “But we have a problem—and it’s not just a British problem, it’s a developed-world problem—in keeping our populations engaged and supportive of our market capitalism, our economic model."
 
Warnings that a backlash against inequality is likely to trigger more activist fiscal policies and that "events show nations are becoming less willing to cooperate, more willing to contest," were issued by analysts from Bank of America Merrill Lynch citing the rising anti-trade sentiment. Amid a looming war against inequality, a wave of inflation could be unleashed as global investment strategies could be reshaped by looser government spending in developed countries—combined with trade protectionism and wealth redistribution.
 
Efforts to boost trade, combined with a more equitable distribution of the fruits of economic growth, are key to ensuring U.S. propriety, said the U.S. Treasury Secretary Jack Lew during an interview in Washington on Thursday. he added that any attempt to boost median incomes could face problems by rolling back on globalization.
 
Donald Trump, who some believe could take the U.S. down a more isolationist trading path should he be elected president in November, seemed to have been indicated by him even though he did not mention any name.
 
"The emergence of Donald Trump as a political force reflects a mood of growing discontent about immigration, globalization and the distribution of wealth," write analysts at Fathom Consulting, a London-based research firm. A Trump administration might be benign for the U.S. economy is at the central scenario of their statement.
 
"However, in our downside scenario, Donald Dark, global trade falls sharply and a global recession looms. In this world, isolationism wins, not just in the U.S., but globally," they caution. 
 
With the U.S. election serving as a possible stress test for global markets, investors are failing to hedge against rising event risks, no matter who wins in November, warned Citigroup Inc. Head FX Strategist Steven Englander.
 
Analysts say that there are plenty of reasons why market players should snap up volatility hedges such as sluggish trade challenging Chinese growth and the rise of populist movement in Europe, amid political attacks on the apparent inequities generated by monetary policy in the U.K.
 
(Source:www.bloomberg.com)






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