The presentations during the conference, with the exception of the keynote speeches, were covered by Chatham House rules, designed to ensure that the presenters felt comfortable to talk openly to those gathered.
In the spirit of those rules we have drawn together some of the most interesting, but unattributed speaker commentary organized into three key themes: capital and capital markets; geopolitics as well as regulation, regulators and risk. In this second article of the series look at what the speakers had to say about geopolitical issues, including the US election, affecting the global economy.
In terms of the global macroeconomic environment, geopolitical tension was considered to be at the forefront of risk and concern.
One of the speakers suggested that the idea, taken for granted just a few short years ago, of a permanent new period of peace and prosperity has become “entirely obsolete.”
Fragmentation is not only having an impact on markets, trade flows, and supply chains, it is also affecting the sharing of ideas. A point made by one speaker that had the audience nodding approvingly was that “geopolitics is a problem to be managed rather than solved.”
One of the most fascinating discussions tackled the potential tangible outcomes of the US election for financial markets. The proposed possible consequences were characterized as follows:
Harris win:
- more of the same;
- more rules / regulations;
- rise in corporate taxes;
- no deficit reduction.
Trump win:
- more disparity between winners and losers;
- elevated volatility but within a narrow trading range;
- no deficit reduction.
A really thought-provoking argument was put forward about the fact that sanctions carry significant longer-term costs by sowing distrust in the monetary system.
Something well intended might actually lead to further fragmentation of capital markets, potentially resulting in decline at a moment when growth is desperately needed as a result of the structural, economic and demographic challenges facing society today.
The Federal Reserve received some unusual praise from one of the industry speakers who suggested that it is ‘doing exactly what it’s supposed to do’ in shifting away from controlling inflation toward the risk of high unemployment.
GRIP Comment
Optimism was absent any time the conference discussions turned to politics and geopolitics. A recognition, perhaps, that even the most powerful of industry players ultimately have only very limited influence on outcomes that involve elections and conflicts.
The rapid fragmentation and retreat of a global economic order has added to the plethora of challenges facing governments and is likely to continue to have an outsize impact on capital markets in future.