GDP growth should be viewed in context. Central banks will do what’s needed to curb inflation. Likewise governments in terms of corporate (and other)  taxation required to acquiesce domestic rumblings. Jubilant stock markets are not a reliable sign of buoyant economies. Climate change is getting hotter and hitting harder. The armoury of cyber warriors is evermore complex, efficient and difficult to counter. The reach of influencers shouldn’t be underestimated – product ‘displacement’ can hurt. Nor should we underestimate the value of preserving precious time to think. 

  • Global GDP continues to gain momentum with impressive rates of growth, most notably in the US and China (estimated respectively at 7% and 8.5% for the year). However, it is important to keep this vibrancy in perspective: by the end of 2021, the global economy will still be 2% smaller than it was at the end of 2019 (according to the World Bank). Furthermore, escape velocity is far from a given with many risks still on the downside. The pandemic is not over despite the market perception that it is (in the rich world). If a new variant takes hold during the summer, it will restrain economic activity and will make politics more difficult by politicising vaccination (the Delta variant is now in 80-ish countries and is the most transmissible of all variants so far).
  • Concerns about inflation are abating, with data showing that some prices are plunging (like for lumber) while others are receding (like for industrial metals). This confirms our conviction that recent price increases are pandemic-induced and most likely transitory. Core inflation has gone higher and will remain above-trend for some months, but a general increase in prices can only take hold if central banks lack the resolve to cool off the economy. The more ‘hawkish’ tone of the Fed and recent action from many central banks that raised interest rates/tightened credit prove that they don’t, and they won’t (lack this resolve).
  • It’s ‘official’: the “Cornwall consensus” is replacing the Washington consensus which over the past 30 years has promoted free-market, deregulation, and pro-globalisation policies. It’s easy to scoff at a rather vague document written by a committee of policymakers and academics, but it shows how much the winds are shifting. The Cornwall consensus places solidarity, inclusion, and better governance at the core of “Building Forward Better”, which may sound empty, but marks symbolically the emphasis put by policymakers on policies that can alleviate the domestic social strife brewing under the surface in G7 countries.
  • The new tax proposal is a practical example of the direction Cornwall consensus policies are taking. G7 finance leaders have just agreed on a 15% global minimum tax rate payable regardless of where companies book their profits. This has the potential to destroy the model upon which tax havens depend. Cracking down on tax evasion and tax optimisation has now become a top global policy priority. Taxation and all sorts of ideas on how to make it fairer will be a core component of the G7 “Building Forward Better”.
  • The US stock market is at yet another all-time high, up 14% since 1.1.21. Corporate earnings lie behind this success – a phenomenon mirrored in the rest of the world (where over the last 15 years, in any particular country, there has been a 90% correlation between the growth in earnings per share and the change in value of its stock market). Why? The dominant players across all industries (it’s not only tech) benefit from considerable market power thanks to economies of scale and network effects which enables them to check competition and stifle innovation. The bottom line: the stellar performance of quoted companies is not the sign of a healthy economy – it obscures the fact that an overwhelming number of SMEs have a hard time, facing harsh environments with little or no profits.
  • In April in the US, almost 4 million people left their jobs in search of greener pastures. This Covid-induced phenomenon, coined “The Great Resignation”, is now global and triggered by two main reasons: (1) the decision to leave dissatisfying or meaningless jobs; (2) the willingness to abandon jobs that do not offer some flexibility (like working less or WFH – “Working from Home”). In the immediate future, this forces employers to offer higher wages and better incentives.
  • The exceptional severity of recent and current heat waves and/or droughts affecting several areas across the globe (from the West coast of Northern America to the Russian Arctic and Madagascar) are yet another wake-up call for policymakers and civil society. Climate change is accelerating and so are policies susceptible to mitigate its risks. Listed companies should start preparing to disclose in a standardised manner the risks they face from climate change. Such disclosures could be made mandatory as soon as November on the occasion of COP26. A game-changer!
  • Cyber-attacks and ransomware are on the increase globally, becoming more targeted and ‘strategic’ in nature. In the US, the FBI is currently investigating about 100 cases of ransomware, many of which came with broad economic impact on top of the business shock (like the attack on the meatpacking company JBS that cut off 20% of US beef-and pork-packing capacity, leading to a temporary shortage and higher prices). In our new era of hybrid warfare, cyber occupies a position of choice. Analysts concur it’s a game of whack-a-mole that will intensify because this invisible war makes retaliation very difficult.
  • Increasingly, influencers and slacktivists (online activists who use social media platforms to engage in ESG causes) can temporarily affect the stock performance of a global brand and potentially endanger the fate of an entire line of business. When, during a recent press interview, Ronaldo – the footballer with more than 300m followers on Instagram – moved aside two bottles of Coca-Cola to replace them with water, his gesture of rejection went viral and was emulated by others (like Paul Pogba with Heineken). Wellness is on the ascendency everywhere, and in today’s hyped world, just one celebrity influencer can vanquish an army of brand managers and costly advertising campaigns.
  • Many decision-makers suffer from problems rooted in the “attention economy”. Attention is our most precious resource but it’s getting scarcer. Hyper-connectedness, an overabundance of information and social media’s noise have hijacked our brains, compromising both our time and ability to think, and as a result to make good decisions. In our most recent “Ask our Expert” conversation, Scott Kirby shared the formula of his antidote (some of his tips sounded counter-intuitive for high-achievers). United Airlines’ CEO, whom US media often portrays as visionary, sleeps a lot (8-9 hours a night), reads a lot (about 3 hours a day + a novel a week), exercises a lot, restricts meetings to 4 hours a day and formal presentations to just one slide.
  • For an in-depth analysis of any of the bullet points and what they mean for you – please contact us.