Investing in a Closed-Border World

Christopher Smart: “As a tumultuous year comes to a close, giddy global markets continue to set new records. But investors should not become distracted. In 2017, they will need to reappraise how the global economy works, and recalibrate accordingly their assessment of every stock or bond on sale, because even if some market fundamentals remain the same, many others have clearly changed.”

“Taken together, these political outcomes – and the anti-establishment forces on the march ahead of next year’s French and German elections – will halt further global economic and political integration, at least in the near term. For now, countries will avoid grand trade deals and make only half-hearted efforts to align their regulations. Companies operating internationally will soon face higher costs, as it becomes harder to move goods across state borders and employ foreign workers; their investors, meanwhile, can expect lower returns.”

“Savvy investors will look for companies that can withstand the current populist revolt against globalization and take advantage of incipient economic and technological trends. Theirs will be a more complicated analysis for more complicated times. Like a good astronomer or anthropologist, however, successful investors will find reliable patterns in a sea of crosscutting evidence.”

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