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Are markets becoming immune to disruptive geopolitics?
There’s no escaping the intricate link between economics and geopolitics. Today, that link has become a crucial factor in investment decision-making, and who better to speak to that than Margaret Franklin, CEO of CFA Institute, a global organization of investment professionals? Franklin sat down with GZERO’s Tony Maciulis at a Global Stage event for the IMF-World Bank spring meetings this week.
Economists once predicted that sovereign debt would overwhelm global markets. But now, having been through the pandemic, the advent of AI, and wars in the Middle East and Ukraine, “there's almost a level of immunity,” she says, “to the dramatic nature of it until something really cataclysmic happens.”
And then? “The response, generally speaking, has been pretty positive,” Franklin says, with central bank intervention saving markets and building resilience.
In much the same way, the World Bank is trying to boost investor confidence by making changes that leverage private sector capital for public sector goals by better evaluating what level of risk the private sector will accept.
Individual investors should do the same, Franklin advises. “Really evaluate your risk profile … making sure you diversify,” she says, noting that fixed-income offerings have become more attractive. Younger investors, meanwhile, need to be cautious with getting their information on social media, she adds.
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Global Stage.
The US-China economic competition is heating up, says investor Ray Dalio
The Chinese think they are on the rise, while America is declining. On GZERO World, Ian Bremmer talks to billionaire Ray Dalio, head of the world's largest hedge fund, who thinks rising US debt, a widening wealth gap among Americans, and the meteoric rise of China all play into Beijing's plans to overtake the US as a global superpower.
Just recently, the US national debt topped $30 trillion for the first time in history, while household debt jumped by $1 trillion, the most since 2007. For Ray Dalio, this rising debt is widening the gap between all the money out there and what it can buy.
Rising debt, in conjunction with long-term high inflation will hurt the US dollar, which in the future might lose its status as the global reserve status to the Chinese yuan, which will become "digital gold." The euro and the Japanese yen are also in similar danger.
Does this mean investors should bet on China over the US? America has a better system, tech and universities Dalio says, but the Chinese "has us outnumbered" in population and pace of per capita income growth.
But while China’s economic growth has been impressive, even during COVID, the pandemic has widened inequality and political divisions in the US.
For Beijing, it's a sign that the East is rising as the West declines.
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Should investors bet on China over the US?
Hard to say these days, even for a billionaire hedge-fund manager like Ray Dalio.
On the one hand, America has a better system, better tech, and better universities. On the other hand, China "has us outnumbered" in population and pace of per capita income growth.
China, he explains, has not only become a powerful competitor. The US has changed, too.
"[The] America that I remember is a different, uh, and grew up with is a different America than it exists today in terms of like equal opportunity and the American dream."
Watch the GZERO World episode: Does China's rise have to mean America's decline?
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Retail investors playing key role in driving market volume
Betty Liu, Executive Vice Chairman for NYSE Group, provides her perspective:
What's been the role of the retail investor over the past few months?
So, US equity market volumes have been pretty high, remarkably high since the end of February 2020, and much of that is being attributed to the rise in retail investment activity. In fact, on peak market days, retail investors can account for up to a quarter of all market activity.
Is this the case for the options market as well?
So, absolutely. In fact, the options market has seen a spike in individual investment activity. That has driven volumes to record highs. So, eight of the top ten multi list options volume days have occurred in the first six months of 2020. So, pretty remarkable indeed.
Why SPAC IPOs are getting so big and popular
Betty Liu, Executive Vice Chairman for NYSE Group, explains:
Why have SPACs been so popular recently?
Well, that's because companies are embracing newer ways to tap the public markets outside of the traditional IPO. You've heard me talk about direct listings, for instance. And now SPACs are having a very big year, this year. In fact, nearly a third of all US IPO proceeds raised have been raised through SPACs in the first half of 2020.
What is the biggest SPAC IPO ever?
So, implicit in that question is that these IPOs are getting bigger. In fact, we saw the biggest ever, last week, list. That was the Pershing Square Tontine Holdings SPAC, raising four billion dollars. Before that, we had the Churchill Capital Corp. SPAC, and that raised a billion dollars.