Once an adapter to globalization, China is increasingly a driver of it. The Next China is becoming a Global China, upping the ante on its connection to an increasingly integrated world – and creating a new set of risks and opportunities.
Slowly but surely, a bruised and battered global economy now appears to be shaking off its deep post-2008 malaise. But this hardly means that the world is returning to normal; on the contrary, the global growth dynamic has undergone an extraordinary transformation during the last nine years.
With markets reacting in part to geopolitical events, it’s hard not to be distracted by news headlines. To help sift through some of the noise, several of our senior investment leaders recently participated in a roundtable discussion of the events shaping the global markets today, the implications for investors and where they see potential opportunities ahead.
Another growth scare has come and gone for the Chinese economy, with export growth up strongly in the first two months of 2017. For the country's policymakers, the challenge now is to stay focused on executing their domestic strategy, rather than seeking to replace the US at the center of the global system.
In an ideal world, it would be nice to streamline, simplify, and even reduce tax and regulatory burdens on US businesses. But business is not the weak link in the US economic chain; workers are, because economic returns have shifted dramatically from the providers of labor to the owners of capital over the past 25 years.
The way investors think about emerging markets has been evolving—along with the markets themselves. One thing we at Templeton Emerging Markets Group emphasize is that one can’t consider emerging markets as one asset class; the opportunities are very differentiated between regions, countries and markets, with different fundamentals shaping them.
After the run-up in the fourth quarter, both TIPS and comparable maturity Treasurys delivered positive returns during the first month of 2017. According to my estimates, TIPS posted a monthly return of 0.7%, modestly better than the 0.3% return on comparable maturity Treasurys.
The Trump administration's China-bashing strategy is based on the mistaken belief that a newly muscular US has all the leverage in dealing with its presumed adversary, and that any Chinese response is hardly worth considering. Nothing could be further from the truth.
As a result of the post-election sell-off in bonds, treasury inflation-protected securities recorded a loss of 3.0% in the 2016 fourth quarter, their worst performance since the 2013 second quarter.
Donald Trump's use of foreign trade as a lightning rod in his presidential campaign is not an uncommon tactic for candidates at either end of the political spectrum. What is unusual is that he has not moderated his anti-trade tone since winning, despite the potentially disastrous consequences for the US and the world.