In Chinese, the ideograms describing Huawei mean “beautiful work” (Hua for “beautiful” Wei “finished work”). Donald Trump does not necessarily seem to agree with the idea that the Chinese telecom equipment manufacturer is doing a really good job. Behind this trade war, there is also a technological war and the search for world economic leadership. Like in ancient Greece, when Sparta and Athens fought for authority over the Greek world before destroying each other, Thucydides’ trap risks closing in on the two world powers. In this context, the markets are very hesitant and risk aversion is clearly perceived in the peaks of volatility. Jérôme Powell, the American central banker, has also begun to alert investors on the record level of debt owed by American companies, which accounts for a record level of 35% of their net assets.
In Europe, the procedure to safeguard the galaxy of holding companies that own the distributor Casino points out that balance sheets that are over-indebted in deflationary and restructuring sectors often lead to bankruptcy. On the political front, the last elections (United States, England, Europe, India, Australia) showed an increase in conservative parties and extreme parties or parties with themes like the environmentalists. The European election does not result in a populist wave but in a fragmentation of Parliament that will force heterogeneous national coalitions and even paralyses. In a way, it is the triumph of the idea of protecting peoples against all external dangers: the Chinese for Americans, migratory flows for Europeans, continental Europeans for the English, the Muslim minority for the Hindu majority, supporters of a more social policy for Australians. In this context, it will be difficult to imagine global growth accelerating in the coming years. The new world order may be more protective of the consciousness and destiny that each people nourishes for itself and of the space in which people aspire to live in peace and harmony.
But this new world order may also be less wealth-producing. All those who have believed in the populist narrative but who probably still remain very attached to their materialistic condition, will have to take responsibility for this choice.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in May 24th, 2019.
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