The economics of narrow self-interest – five key trends
We appear to be witnessing the beginning of a new global economic and market paradigm.
President Trump’s first 100 days in office have been the catalyst for a global economic policy shift toward narrowly defined national economic self-interest. Europe, China, and other economies are adjusting to this new reality and are already adopting idiosyncratic economic policies aimed at reducing their reliance on the US for defence and economic cooperation.
This isn’t a short-term adjustment; it’s a paradigm shift that that we expect will extend well beyond the President’s four-year term. And while the swing toward policy centred on narrower national self-interest seems abrupt, the conditions have been brewing for some time—in particular the decades of low-skilled household income growth lagging behind broad economic growth in an era of international competition.
We expect five key trends to endure:
- No let up for surplus countries.
- Trade is set to become more fractured—potentially along regional lines – as the major trading blocs battle for competitiveness.
- Fiscal policy is back as a demand management tool. Fiscal and industrial policy go hand-in-hand and are likely to have a more active influence on the economic cycle.
- The net supply of safe government debt is set to rise, just as it loses some of its appeal.
- The repricing of market risk premia is just getting started.
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