I have been amazed in recent years and continue to be amazed at how the markets run away the most dramatic political and economic events. Pandemics, wars, the fall of the global trading system, the rise of right -wing nationalism and left -wing populism – nothing seems to be derailed by the animal spirits of investors.
Many reasons were given for this, from still high corporate income to the promise of artificial intelligence to the so -called Taco trade. But I would like to suggest someone else: the world simply didn’t choose a new economic story. Until this is the case, we will probably linger in a time of the restless market tray.
Historically, political economies are usually defined by large, comprehensive stories. Mercantilism from the 18th century gave way to the Laissez-Faire from the 19th century, which finally created Keynesianism, which in turn made space for the Reagan-Hhatcher revolution and the neoliberal era.
But today there is not a single story about where we are or what comes next. Instead, there are several competing competition with regard to globalization, inflation, capital markets, politics and technology. All of this creates a kind of Rashomon effect – the same data and events can be interpreted by various market participants in a contradictory way.
For example, we know that the global trading system is in the river. Since 2017 there has been less trade between the geopolitical -distant partners. Large economies are now “Icelandising”, as the consulting company Kearney puts it and focuses more on national self -sufficiency than on global integration.
An Asian participant in a CEO conference that I took part in two weeks ago, all of this told me “in a spectrum”. If you sit in the Pacific, “there is more globalization than before and probably still”.
According to a recently carried out McKinsey report on change worldwideOf the today’s 50 largest commercial corridors, 16 would increase by 10 percent due to an increase in global tariffs and an increase from tariffs to China and Russia. These are the new ways that combine the aspiring economies from India to the Middle East.
The Rashomon effect also plays at the company level. In which industry they are obviously very important. But size is also important. The trade disorders caused by tariffs will only be another tailwind for large companies, since they can provide more resources than smaller ones to reduce the adverse effects.
Several CEOs and supply chain experts with whom I have recently spoken to say that in large companies there were so many post-pandemic supply chain optimization that many will be able to buff it 80 percent or more of inflationary tariff pressure with increasing efficiency.
Not so for other players. According to the JPMorgan, Donald Trump’s tariffs will cost $ 82 billion or 3 percent of their salary billing, which will probably mean layoffs and narrower margins. In the meantime, economists fear that many small companies will simply go under.
If this happens – and it is something that regional Federal Reserve officers begin to pursue, this in turn would have a disproportionate influence on employment and wealth distribution in rural areas and smaller cities that have fewer employers. This would worsen the geographical superstar effect, in which they would work for large companies, while small business owners and employees in less populated areas do not.
This gap is part of what the volatile policy of the United States and the many other countries is driving. In America, both rights and left -wing populism are growing. Those under pressure in the Red State America could vote on Maga, while young liberals who cannot afford rent in Big Apple, Zohran Mamdani, a democratic socialist who could possibly become New York’s next mayor.
I suspect that this narrative will be replicated in the 2028 presidential election when the Democrats select an economic populist as their candidates – something that they have for all reasons, considering how centrians, including Kamala Harris, failed. But this dynamic opens the door to even more uncertainty about the future of the United States.
As a recent survey by Deutsche Bank, investors are almost evenly divided whether they believe in the future of the American exceptional regulation or not. Four of four were optimistic and believed that no other country could compete against growth and dynamics despite the latest events. But 49 percent thought that America’s position in the world would slowly erode in the coming years. Seventy -eight percent preferred to keep the euro for the dollar next year, although the ratio was 50/50 over five years.
As if all of this was not enough uncertainty, there are also AI. Will technology increase productivity and keep profits and share prices high? Will there be too many jobs too quickly, which leads to higher unemployment and other populist counter -reactions? Or not? Which countries and companies will win? Can we even afford energy and water costs?
There is no clear answer to one of these problems. I have never seen so many potentially market -moving vectors in my career at the same time in the game. The fact that the markets do not reflect this does not mean that they won’t do it.
