In the 1970s we saw oil price shocks – we have oil price shocks right now; the 1970s were characterised by social unrest and strife – we have that now; and the US Federal Reserve ran a very loose monetary policy for too long during the 1970s, which exactly mirrors what we see today.
At present interest rates in most countries are way below levels of consumer price inflation. If central banks want to bring inflation down, they need rates to be much higher – therefore, we expect the US and other developed markets to hike interest rates significantly from current levels, which is going to hit segments of the market hard.
Turning to the impact of geopolitics, this theme is best described by the headline “the East wins, the West loses”, as there is already plenty of evidence of a global power shift from the US to China. This can be seen in China’s leadership in the technology race, to its emerging dominance in the space race and US$8 trillion investment in infrastructure projects through its Belt and Road Initiative.
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