USA: The largest asset manager in the world's executives are concerned about rising long-term inflation and the Federal Reserve's willingness to protect stock investors.
Last week, Blackrock Inc. released its Global Outlook for 2023. The report identifies three drivers that are important to understand because they will likely cause a temporary reset in the prices of stocks and bonds.
Bullish predictions have been made for On Semiconductor (ON). I'll explain.
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Blackrock was an early proponent of globalisation, the notion that if the world's economies, cultures, and populations were more interdependent, the global economy would become more tranquil and prosperous. The idea was that a world where people could freely exchange goods and services would be more likely to get along.
Global supply chains quickly became armed in reality. Manufacturing was moved to Asia, particularly China, where leaders hoped to use their influence there to influence Africa and the developing world. Financial capital began to concentrate in London and New York, where financiers and consultants created tax havens and offshoring schemes. And the developed nations gorged themselves on cheap goods and low borrowing rates.
Blackrock's chief investment officer, Philipp Hildebrand, referred to this time as the "Great Moderation," a four-decade stretch of steady economic growth and low inflation. He now thinks the GM era is over, and investors should brace themselves for increased volatility and persistent inflation.
Hildebrand identifies three major regime drivers in the Global Outlook playbook that will make life miserable for investors and central bankers worldwide for the foreseeable future. These trends have already started, making changes difficult.
Due to low birth rates, the world is ageing. The cost of providing for the elderly will be high. Additionally, it will result in a lack of qualified workers. Budgets for the public sector will also be completely blown out, as it has been in Japan since the 1980s.
Deglobalization is the methodical dismantling of the global supply chains that reduced manufacturing costs. The haste to politicise semiconductor design and production makes this trend obvious. There are expensive new facilities being planned for both Europe and the US.
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The quick switch from fossil fuels to clean energy alternatives is the third regime driver.
The conflict in Ukraine hastened the use of non-carbon fuels and is interfering with current investments in fossil fuels. According to Blackrock strategists, the disorderly transition may lead to fuel shortages that will ultimately cause havoc with the world economy.