Weak global trade, fears that the U.K. is marching towards a hard Brexit, and polls indicating that the U.S. election remains a tighter call than markets are pricing in have led a bevy of analysts to redouble their warnings that a backlash over globalization is poised to roil global financial markets—with profound consequences for the real economy and investment strategies.
From the economists and politicians at the annual IMF meeting in Washington to strategists on Wall Street trying to advise clients, everyone seems to be pondering a future in which cooperation and global trade may look much different than they do now.
Suggestions that the U.K. will prioritize control over its migration policy at the expense of open access to Europe’s single market in negotiations to leave the European Union—a strategy that’s being dubbed a “hard Brexit”—loomed large over global markets. The U.K. government is “strongly supportive of open markets, free markets, open economies, free trade,” said Chancellor of the Exchequer Philip Hammond during a Bloomberg Television interview in New York on Thursday. “But we have a problem—and it’s not just a British problem, it’s a developed-world problem—in keeping our populations engaged and supportive of our market capitalism, our economic model.”
Citing the rising anti-trade sentiment, analysts from Bank of America Merrill Lynch warned that “events show nations are becoming less willing to cooperate, more willing to contest,” and abacklash against inequality is likely to trigger more activist fiscal policies. Looser government spending in developed countries—combined with trade protectionism and wealth redistribution—could reshape global investment strategies, unleashing a wave of inflation, the bank argued, amid a looming war against inequality.