Published by Harriman House, £16.99
Even before he enters the White House, Donald Trump is threatening American car firms with import tariffs unless they move factories back to the US. For many, this is yet another sign that we are past the point of what fund manager Gervais Williams calls "peak globalisation" and are heading into an environment that will be much less favourable for international trade.
From the mid-1970s onward, Western economies embraced globalisation as a way to improve growth and reduce inflation, says Williams. But while the expansion of trade boosted growth, companies got most of the benefits. This was because they used the fall in the price of manufactured goods to boost margins and profits. Meanwhile, lower inflation caused by cheaper imported goods enabled central banks to reduce rates, while rising household borrowing kept consumption booming. All of this was good news for the stockmarket.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This cycle has now broken down. Stalling productivity has hit real wages, which are still below their 2007 peak. And quantitative easing in developed markets and China's debt-fuelled investment cycle, which jointly prevented the global economy from collapsing, have now reached their limits. So firms are going to see their margins squeezed, while trade wars and interest-rate rises will cut economic growth. This will hit stocks, suggesting that investors should expect a long period of poor returns.
The Retreat of Globalisation is short and to the point. Williams' focus on the importance of corporate profit margins is particularly welcome and his investment recommendations are sensible without being obvious. Both private investors and professionals should take the time to read this book.
-
Water companies blocked from using customer money to pay “undeserved” bonusesThe regulator has blocked three water companies from using billpayer money to pay £1.5 million in exec bonuses
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
