I attended the Chief Economist Breakfast on Friday 7th of February and though I would share some of the insights I gained on the day with you all. I have shared, at the end of this writeup, a list of presenters and panellists and their short bios to give you an idea of the wealth of experience and knowledge that was shared during the event. I have also attached herewith their respective presentations as they have shared some excellent charts that are very illustrative and paint a comprehensive picture of what was discussed.
General consensus across the majority of the presenters was for global economic growth to be higher in 2020 due to easy financial conditions, limiting recession risks, and led by manufacturing pick-up along with wage growth and business spending.
The US market has had wage growth and is showing signs of a more resilient household and hence an uplift in spending is to be expected. The current reporting season has shown profit growth for over 70% of companies already reported. However, with continued wage growth, company profits have started to decline, and this could lead to a difficult 2021 given valuations are somewhat stretched in the US equity markets.
The global manufacturing recovery also benefits Japan and Europe and we could see some growth coming from that part of the world that will help provide a boost to the global economy.
However, Stephen Green from Capital Group was negative on China. He believes economic numbers are weaker than what is shared and both trade and the jobs market are weak.
I believe there is room for stimulus from China and their longer-term plans to move from a manufacturing base to a consumer base has been successful and this bodes well for the Chinese GDP.
The ‘X-Factor’ in this scenario of continued growth is the China Coronavirus impact. There will definitely be a negative impact in the first quarter this year assuming the virus spread decelerates over the coming weeks. This could lead to disruption on the supply chain across the developed world and cause a further downturn in global markets. However, any disruption and subsequent impact on global GDP and equity markets is expected to be short-lived. Emerging markets and Asia are still expected to continue their growth momentum in 2020 and could provide a much-needed boost to the global economy.
Longer term risks, expected to eventuate from 2021 onwards are:
- Potential risks – U.S. November election – Trump might exacerbate the trade ‘war’ with China. We see this trade war as continuing as it is more about technological power struggle than trade and we cannot see this abating anytime soon. If Trump is re-elected for a final term, he may be more resilient in continuing this negotiation and become more ‘protectionist’ thereby destabilising the global growth trend.
- Change to consensus of “lower for longer…for sure” with regards to interest rates causing upward pressure on debt and earnings.
- Inflation isn’t dead –Tight labor markets, rising wages and sluggish productivity growth could stoke inflation. A disruption of global supply chains could lead to inflationary supply shocks.
Please see the presentations below and click on the links to view. I have also provided a brief BIO on each of the presenters under their individual links.
Ben Powell, CFA, is Chief Investment Strategist for APAC within the BlackRock Investment Institute. Mr. Powell is responsible for delivering value added market and investment insights across asset classes in the APAC region. He is experienced in developing both a macro level framework, and tactical ideas that sit within that framework. Mr. Powell has more than 17 years of experience in Capital Markets.
Before joining BlackRock in 2019, Mr. Powell was co-Head of UBS Investment Bank Multi-Asset APAC Sales based in Singapore. In this role he was responsible for managing a team generating insights for clients across Fixed Income, Equities, Absolute Return and Quantitative investment strategies.
Bob is executive director and chief global economist for Principal Global Investors.
In these capacities, he establishes and directs global economic policy and strategy, oversees and conducts macroeconomic and quantitative research, forecasts economic trends and anticipates market movements, and advises the investment staff in making economically sound investment decisions. Bob also directs macro-economic research for Principal Portfolio Strategies, an asset allocation boutique of Principal Global Investors.
Sean Taylor is DWS Group’s Chief Investment Officer for APAC and Head of Emerging Market Equities having joined the company in 2013 with 21 years of industry experience. Prior to his current role, Sean was the Regional Investment Head APAC at Pioneer.
Prior to this, he managed global and international mandates at GAM based in London and Dubai. Prior to joining GAM, Sean was head of global equity at Societe Generale.
Stephen Green is an economist at Capital Group, responsible for covering Asia. He has 14 years of investment industry experience and has been with Capital Group for four years.
Prior to joining Capital, he was head of economic research for Greater China at Standard Chartered Bank, in Beijing, Shanghai and Hong Kong. Before that he ran the Asia Programme at Chatham House, the U.K think tank. Stephen is based in Hong Kong.
Danielle has more than 15 years’ experience as an economist in government, consulting and the not-for-profit sector.
She is currently the Budget Policy and Institutional Reform Program Director at the Grattan Institute where her research and advocacy efforts focus on tax and budget policy, inequality, competition policy and political reform.
Danielle is the National Chair of the Women in Economics Network and sits on the Central Council for the Economic Society of Australia.