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THE WEEK 28 May 2022Talking points
The highlight of the last gathering of the
global elite at Davos, in January 2020,
“was a spat between Greta Thunberg
and Donald Trump”, said Larry Elliott in
The Observer. “Scant attention was being
paid to reports of a new virus recently
detected in China”; most of those
who’d trekked to the Swiss alpine resort
“were too busy virtue-signalling” about
inequality and the climate emergency. A
lot has happened in the past 28 months,
and this week’s meeting of the World
Economic Forum (delayed from January
because of Omicron) had a very different
feel. “Davos has always been dedicated
to globalisation”, but “a combination of
pandemic and Putin” has accelerated an
existing trend. A big unofficial theme of
this year’s shindig, therefore, was an existential question: does
Davos still have any relevance in “a fragmented world where
globalisation is in retreat”?The mood among the CEO crowd was “anxious and dour”, said
Andrew Ross Sorkin in The New York Times. Many comparisons
were made to the 1970s (or the tech crash of 2001). There was
“a sense that inflation will remain persistently high and that a
recovery will take many years”. The good news is that the famous
“Davos Consensus” is often wrong – a clear “contra-indicator for
the future”. Nonetheless, it was hard to laugh off the gloomyeconomic backdrop to this year’s
meeting, said Ben Woods in The Daily
Telegraph. IMF chief Kristalina
Georgieva warned of a “confluence
of calamities” in the world economy:
from growing food protectionism to
“mounting concerns that the world
could split into two economic blocs”. It’s
what the economist Mohamed El-Erian
calls the “little fires everywhere”
characterisation of the global economy.This year, Davos was preoccupied with
what Jane Fraser of Citigroup called
“the three Rs”, said the FT. “Russia,
recession and [interest] rates.” The star
of the show, appearing via video link,
was Ukraine’s president Volodymyr
Zelenksy, who earned an ovation after imploring business leaders
to stop “all trade with the aggressor”. Conversation at Davos
revolved around “deglobalisation and its discontents”, said Rana
Foroohar in the same paper. The arguments are familiar: “unless
we return to the mid-1990s status quo of neoliberalism, doom
awaits”. Yet the economic and political consequences of lopsided
globalisation “are the key reason that we are now in a period
of deglobalisation”. As Davos types “continue to debate whether
decoupling is possible”, business is “simply getting on with the
new reality of a post-neoliberal world”, creating their own
regional supply chains. “They should get out of the ivory tower.”Issue of the week: the return of Davos
President Zelensky addresses the forum remotelyFinding shelter: what the experts think
● Nowhere to run...
Investment old-timers
love to pooh-pooh
contemporary market
skirmishes, said Katie
Martin in the FT. “You
think this is bad? Pah, you
should have seen Black
Monday...” But right now,
even the old-timers accept
“we are at a historic
juncture”. It’s not just that
the US S&P 500 is hovering
close to bear territory,
having fallen by 19% this
year, and dragging down
other equity markets with it. The big and
worrying change is that bond markets,
which usually rally when recession
threatens, are falling too because of the
threat posed by inflation. “Adherents to
the classic portfolio split – 60% stocks,
40% bonds – haven’t had it so bad in
half a century.” No one is clear how the
situation might unfold. “As it has never
happened before, we cannot look back
for historical guides,” noted the hedge
fund Man Group in an investment note.● ...nowhere to hide?
“De-risking” is all the rage, said David
Brenchley in The Times. Yet even some
traditionally defensive stocks – such as
shares in consumer staples and retailers –
are now under siege. The trick is to find
stocks with inflation-linked revenues, saidMarkets: “at a historic juncture”The 2022 Rich List
The UK’s richest people added £50bn
to their coffers in the last year, said
Katie Grant on iNews.co.uk. Hardly
a message that will go down well with
“the more than one million people
expected to fall into poverty”. Here
are some of this year’s headlines:
● “The top 250 entries” in this year’s
list now “hold more wealth collectively
than the top 1,000 on the 2017 list”.
Their combined wealth grew to
£710.7bn – up 8% on last year.● A changing of the guard sees the
Ukrainian-born billionaire Sir Leonard
Blavatnik (down £3bn to £20bn) cede
his place as the UK’s richest to Sri and
Gopi Hinduja and family (up £11.5bn to
£28.5bn), whose industrial and financial
empire enjoyed a bumper year.● Shooting into second place is Sir
James Dyson (up £6.7bn to £23bn).
“Despite the headwinds of shipping
disruption and the world shortage of
microchips, Dyson Group had a record
year in 2021,” says The Sunday Times.
The Top Ten’s biggest gainer, up £13.7bn
to £19.25, is Guillaume Pousaz, the
former beach bum behind online
payments firm Checkout.com.
● Despite some high-profile losers
(Roman Abramovich’s wealth halved
from £12bn to £6bn), oligarchs with
connections to the Kremlin seem
to have suffered few ill effects. The
fortunes of most super-rich Russians
in the UK remain “largely intact”.Does the annual gathering of the global business elite have any relevance, when globalisation is in swift retreat?Laurence Hulse of
Gresham House. Other
defensive options include
healthcare stocks. The
Sunday Times tipster Ian
Cowie suggests “food”
should remain a major
theme – he reckons ADM,
one of the world’s largest
traders of corn, soybeans
and wheat, still has plenty
of mileage. Meanwhile,
many investors are turning
to specialist “wealth
preservation funds”, such
as Capital Gearing, RIT
Capital Partners and Ruffer Investment
Company – the latter is up 7.7% this year.● Wealth preservation
If you’re feeling “paralysed”, consider the
broader picture, said Merryn Somerset
Webb in the FT. “Hold things that are
seeing their prices rise from supply
crunches, such as fossil fuels and
commodities. And absolutely, crucially,
expect volatility.” With that in mind, “hold
gold”. If possible, you should keep three to
six months’ worth of cash as an emergency
fund, Rob Gardner of SJP told The Times.
“This is crucial to stop you from panicking
and it allows you to ride out the volatility
of markets.” Anything over and above that,
which isn’t needed for at least ten years,
should be invested to beat inflation.
“You need to think in decades, not days.”