Since today's guest was last on this program back in December, the world has continued to fracture geopolitically.
Where is that trend taking us?
And what will the impact be on global prosperity?
The majority of folks who watch this Thoughtful Money channel are primarily from the US, Canada, Europe and Australia. So to provide a perspective from a non-Western point of view, I'm pleased to welcome Michael Every back onto the program.
Michael is Global Strategist at Rabobank, and joins us from Thailand.
Michael sees a new era of rising ‘protectionism vs mercantilism’ as world trade increasingly Balkanizes, and the cooperative globalism that has defined recent decades is unwound.
For international relations, for the global economy as well as for investors, navigating the future is about to become a lot more complicated & unpredictable as a result.
Here are my key takeways from the discussion:
Michael sees financial markets as overly optimistic, given the sea change going on in how world trade is conducted.
Specifically, world trade is bifurcating into “the West vs the Rest”, with a pronounced shift towards protectionism in the West driven by necessary defense against the more mercantilist policies of the Rest.
Regression and unwinding of globalization are inevitable. In fact, Michael argues that the post-Cold War movement to create a conflict-free global economy was a noble but naïve endeavor, as both economic theory and history argue it’s not sustainable.
This unwinding may fracture long-standing alliances. Europe's future alignment is uncertain, and different member nations may end up partnering with different trade blocs. Surprisingly, Germany may be at risk of cozying up more with China & Russia.
Investing will become increasingly challenging as
government policy will become increasingly intrusive, selectively targeted, and driven by national security goals vs economic ones. The government’s thumb will create winners and losers, but it may also appropriate the winners spoils, too — trying to predict and navigate this will be similar to playing "3D chess."
Michael sees the world in the very early stages (i.e., the second inning) of this new world trade order. He warns the changes to come will take most investors and analysts by surprise, leading to outcomes that seem unimaginable at present.
One of the more predictable outcomes of re-shoring jobs, investing in domestic manufacturing, tariffs, etc is price inflation. So Michael favors Treasury Inflation-Protected Securities (TIPS) as they provide some hedge against inflation’s bite. He is bullish on commodities, but less so, noting the potential for significant price manipulation by governments for geopolitical reasons. Investors need to be prepared to manage these fluctuations and become educating in the underlying geopolitical dynamics that will increasingly drive market prices.
Two big lessons Michael has learned along his careers are the benefits of financial prudence (“pay off your debts as soon as possible”), and the importance of blending academic knowledge with real-world experience to effectively navigate complex and challenging environments.
To experience the full interview with Michael, watch the below video:
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