Markets have been experiencing "a collapse of confidence", says Adam Tooze in The New York Times. The main problem is not the economic backdrop, but a deeper realisation. It seems finally to be dawning on investors that globalisation is "no longer supported by the combination of... economic policy and congenial politics" they once took for granted.
World trade volumes have now shrunk for three consecutive quarters, notes Yasemin Engin of Capital Economics, a consultancy. In August, China's exports to the US declined by 16% year-on-year, while imports from America fell by 22%. This year is set to be the worst for trade since 2009.
The end of an era
Yet "from Washington to Buenos Aires", political commitment to open markets is "disintegrating", says Greg Ip in The Wall Street Journal. Where the US once supported global institutions such as the World Trade Organisation, now it "leads in crippling them". That has left investors and businesses scrambling to rearrange their portfolios and is "pushing the global economy closer to recession".
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
The ties that bind
Yet even if globalisation is not undone, the new direction of travel is clear. While markets today largely dance to the tune set by Wall Street, decoupling between regions means that future business cycles may become less correlated. That makes geographical diversification more important than ever. Corporate earnings could be another casualty. After years of conquering the world, US companies are now shifting to a "defensive" stance, says Rana Foroohar in the Financial Times. No wonder. As Tooze puts it, the prospect of a world economy divided between a "sclerotic Europe, a nationalist United States and an authoritarian China is a gloomy one". Investors should be prepared.
-
8 of the best houses for sale with annexesThe best houses with annexes – from a period property in the Lake District to a 13th-century house with a two-bedroom annexe in Saltwood, Kent
-
Zelenskyy moves to appease Donald Trump – what happens now?Ukraine’s president Volodymyr Zelenskyy is conceding ground to secure the least-worst deal possible, says Emily Hohler
