patrick reeve current global trends and their … reeve... · current global trends and their...
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Patrick ReeveCurrent Global Trends and their Investment Implications
Patrick Reeve Current global trends and their investment implications
• Population DensityPeople per square km, 2015
• Africa’s population growing at 2.6% pa v. GDP growth of 1.6% pa
• World ageing faster – Actual and projected time taken for population over 65 years old to move from 7% to 21%:
• France – 157 years• UK – 100 years• US – 89 years• Brazil – 38 years• China – 34 years
2
Population
0 50 100 150
Oceania
North America
Latin America
Europe
Africa
World
Asia
Source: FT
• “Fundamental political ‘trilemma’ of the world economy: We cannot simultaneously pursue democracy, national determination and economic globalisation” [Dani Rodick - Harvard]
• Importance of trade in Global Growth
3
Globalisation (1)
0
500
1000
1500
2000
2500
3000
3500
4000
450019
50
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
GDP
Exports
Source: FT
• World trade stagnating:
• Globalisation has reached a plateau – “Important segments of the Western public no longer believes increased trade benefits them” [Martin Wolf – FT]
• Growth in US real incomes (% by year)
4
Globalisation (2)
0
5000
10000
15000
20000
25000
30000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
World trade in goods and services
Trade in commercial services
Merchandise trade
-1
0
1
2
3
1917-1948 1948-1972 1972-2013
Top 10%
Average
Bottom 10%
Source: FT
• % of households with flat or falling real market income, 2005 to 2012/14
• Brexit vote - 73% 18-24 year olds – Remain
- 40% over 65 year olds – Remain
5
Globalisation (3)
0 20 40 60 80 100
Average of 25 countries
Sweden
France
Netherlands
UK
US
Italy
Source: FT
6
Globalisation (4)
• Vicious circle of low growth, stagnating incomes, social dissatisfaction, political fragmentation, increased protectionism
• Paradox of low growth leading to measures that result in even lower growth
• “An end to facile optimism about the future” [Martin Wolf -FT]
• The ages of innovation
Growth in the US total factor productivity (% per year)
• US productivity in 2016 falls for first time in 30 years
• “Some Inventions are more important than others” [Robert Gordon – The Rise and Fall of American Growth]
7
Productivity (1)
0
0.5
1
1.5
2
1900-20 1920-70 1970-94 1994-04 2004-14
Source: FT
• Average time spent per working day in UK
• 2016 “Digital detox” survey by Ofcom:
• 33% of 16-24 year olds “more focused and productive”
• 24% of 16-24 year olds “missing out on things”
• 5% of 16-24 year olds “lost without it”8
Productivity (2)
Media/Communications 8 hrs 45 mins
Sleep
8 hrs 18 mins
No media
6 hrs 56 mins
• Global debt now at $152 trillion – twice size of Global economy [Source – IMF]
• Resulting in excess under-performing assets and danger of inflation
• Oil production
Barrels a day (m)
• “Sooner of later everyone sits down to a banquet of consequences” [RL Stevenson]
Productivity (3)
0
2
4
6
8
10
12
14
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Russia
Saudi Arabia
US
Source: FT
UK Prospects
-7
-6
-5
-4
-3
-2
-1
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
184790.26
Oct 11 201629.27
1 2
3
5
4
6
1. 1920s – UK rejoins gold standard2. 1931 – UK leaves the gold standard3. 1949 – Attlee government devalues4. 1967 – Harold Wilson’s ‘Pound in your pocket’ devaluation5. 1992 – Black Wednesday, UK leaves ERM6. 2008 – Financial crisis
• Structural long termcurrent account deficit
UK current account balance(% of GDP, sum over previous four quarters)
• Sterling’s 168-year low £ effective exchange rate
• UK 2nd biggest exporter of commercial services at 7.3% global share
• “Britain’s service sector will see its exports drop by 60% after leaving the European single market” [National Institute of Economic and Social Research]
Source: FT
• Annual SME survey – since 2013 - 556 companies with more than 5 employees (1,014 in total)
• Fundamental optimism of SMEs • 73% forecasting growth• 57% increase in productivity• 51% increase in staffing
11
Albion Growth Report
Source: The Albion Growth Report
• Shortage of skilled staff – biggest single barrier to growth
• CEOs under 35
• Most worried about Brexit
• Most worried about Global competition
• Most likely to enter into new markets
• 59% improvement in productivity due to:
- Improved skills
- Work ethic
• Most likely to consider equity finance from angels, private equity or venture capital (43%)
12
Albion Growth Report
Source: The Albion Growth Report
• Overview – period of rapid global transformation
• Sharp demographic changes - World getting smaller- Changes to the way we live
• Low global growth - Declining productivity- Pressures on trade
• UK - Exposed – as a trading nation- Currency decline- Inflation threat
Strategic Investment Influences (1)