Productivity Awakening?

In case you missed it – which was easy given the recent gyrations in Italy and financial markets – we published our Secular Outlook this past week. Argentina, Italy and most recently President Trump’s imposition of tariffs on steel and aluminum imports from the EU, Canada and Mexico, among others, are some recent examples of rude awakenings for complacent financial markets. However, as we lay out in more detail in the outlook, these events may only be a small taste of things to come over the secular horizon. Here are the key takeaways.

Following the three-day forum with distinguished external speakers and our Global Advisory Board as well as our subsequent internal discussions, we concluded that we may be witnessing an important turning point: Ten years after the financial crisis, the global economy and financial markets look set to enter a new era of potentially radical change that will make the future look very different from the past.

The post-crisis environment has been characterized by financial repression through regulation and dominant central banks, mostly passive or restrictive fiscal policies, largely uninhibited trade and capital flows, subdued growth and inflation, and low volatility in the macro economy and markets. To be fair, the past decade had its fair share of rude awakenings, but whenever they came along, central banks were quick to step in and prop up markets and economies.

A more difficult environment ahead

We expect a very different macro landscape to emerge over the next five years, for better or worse. Already there are important shifts underway: The monetary-fiscal policy mix has been changing with central banks retreating and fiscal policy becoming more expansionary; the regulatory discussion is moving from the financial to the tech sector, and economic nationalism and protectionism are on the rise. However, bigger disruptions may lie ahead; here is a list of five potential sources of major rude awakenings for investors over the secular horizon: