What Does An "America First" World Look Like? | Michael Every
Nov 17, 2024
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Michael Every, Global Strategist at Rabobank, discusses the rise of nationalism and its implications for the global economy following Donald Trump's return to power. He explores how this 'America First' agenda may reshape trade dynamics, highlighting the strategic use of tariffs and the interplay between major economies. John Lodra and Mike Preston provide insights into market movements and the necessity of hedging strategies amid shifting sentiments. The conversation reveals both opportunities for investors and the risks that come with protectionist policies.
The global economy is shifting from globalization to mercantilism and protectionism, significantly influenced by the resurgence of the 'America First' agenda.
Investment opportunities are emerging in sectors like local manufacturing and infrastructure as nations prioritize their own economic interests over collaboration.
Economic statecraft is increasingly viewed as a tool for national power, challenging traditional metrics of economic policy in the face of evolving global dynamics.
Deep dives
Current Global Economic Landscape
The global economy is at a critical juncture, characterized by a mix of opportunities and risks. This situation is underscored by the election results in the U.S., where a shift toward nationalism and protectionism is becoming increasingly evident. The rise of leaders promoting America First policies signifies a changing global economic strategy, moving away from globalization towards mercantilism. Various regions and demographic groups will experience divergent paths, with some faring well while others may struggle, leading to a fragmented economic structure moving forward.
The Shift from Globalization to Mercantilism
There is an ongoing transition from a globally interconnected economy to a more mercantilistic approach, as countries prioritize their own interests over collaboration. This shift has been long predicted and is evidenced by policies promoting domestic manufacturing and local supply chains in the U.S. Historically, global systems thrived post-World War II, but the current trajectory suggests a reevaluation of alliances and trade relationships. This fragmented economic environment will likely result in nations competing fiercely for resources and power, mirroring past geopolitical struggles.
Economic Statecraft vs. Economic Policy
The conversation highlights an essential distinction between economic statecraft and traditional economic policy. Economic statecraft views the economy as a tool of national power, focusing on how economic decisions align with broader strategic interests. In contrast, economic policy typically aims at specific domestic metrics, such as inflation rates or employment levels. As global dynamics evolve, states will increasingly employ economic levers to achieve strategic objectives, challenging the notion that economic strategies can be evaluated independently of geopolitical contexts.
Impacts of Nationalism on Investments
The rising wave of nationalism is set to reshape investment landscapes significantly, influencing sectors and asset classes. Investments that align closely with national interests, such as local manufacturing and infrastructure, could gain favor in this new economic order. Investors are likely to see intensified competition for resources and markets as countries adopt strategies to minimize trade deficits. This reorientation may lead to higher tariffs on imports from nations considered adversarial while bolstering domestic sectors viewed as vital.
Market Trends Amid Political Changes
With recent political shifts, particularly the strong resurgence of nationalist politics in the U.S., market dynamics are also evolving. The dollar is projected to strengthen as the country focuses on reducing the trade deficit, impacting currencies and commodity prices globally. This could result in commodity prices falling as the dollar appreciates, and changes in investment strategies surrounding assets like gold and cryptocurrencies might emerge. Investors should remain vigilant as these market trends develop in response to shifting economic policies.
Strategies for Navigating a Fragmented Economy
In the wake of changing global economic policies, strategic investment approaches must adapt to new realities. Analysts suggest focusing on sectors poised to benefit from the push for local production and supply chains, such as logistics and mid-cap companies. Hedging strategies might also be prudent as market volatility increases, allowing investors to manage risks effectively. Ultimately, a thorough understanding of the broader economic landscape will be crucial for making informed investment decisions in this evolving environment.
When today's guest was last on this program back in May, he predicted we'd see continued momentum geopolitically away from globalization and towards mercantilism and protectionism.
That has proven to be the case worldwide, and particularly so for the US, where Donald Trump has just regained the Presidency with a clear mandate to pursue an "America First' agenda.
How is this wave of nationalism around the world likely to impact the global economy?
What are the biggest opportunities it may open up for investors? And what are its biggest risks?
To discuss, we're fortunate to be able to spend the next hour with Michael Every, Global Strategist at Rabobank, who joins us from Thailand.
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