It would be beyond cliche (not to mention pointing out the scientifically bleeding obvious) to state...
It would be beyond cliche (not to mention pointing out the scientifically bleeding obvious) to state that the world does not stand still. We in the West have got used to cultural and economic pre-eminence, but there are more factors at work than Russia's overwhelming triumph in this year's Eurovision song contest to suggest that this will not always be the case.
One of the tenets of behavioural finance (about which much has been written and spoken in the current market turmoil) is the recency bias. Investors tend to believe that whatever has happened most recently - be it the outperformance of technology stocks in the late 1990s, or the rocketing values of residential property in the early years of the 21st century - will continue to happen. But there has been a historical recency bias at work on a much larger scale.
Northwestern Europe - and, latterly, the US - have become comfortable in a position of leadership. But the ancient empires of North Africa, Southern Europe and the East led the world in thought, word and deed while we were all still comparatively primitive. Stonehenge is a mighty edifice, but it is hardly on the scale of the Great Pyramids in terms of craftsmanship. Could it be that now is the time for the world order to change again?
In his comment on emerging markets on page 41, Bryan Collings of Hexam Capital, a Resolution-backed emerging markets boutique, says investors in the 'developed' world need to up their exposure to emerging markets as a hedge against a structural slowdown in the West. With commodity prices still surging and inflation high as a result, we in the West are feeling the pinch, while the cash-rich, debt-free nations of the developing world can afford to pay the going rate for the materials they need in order to continue to develop.
This is backed up by Franklin Templeton's Mark Mobius, one of the world's most experienced emerging markets investors and the subject of this month's Fund Profile on page 36. He says slowing demand from the West is less of a problem for emerging markets manufacturers, who are now sending as much as 80% of their output to their neighbours.
Don't get me wrong - much of the emerging world still lives in grinding poverty, not to mention having natural disasters such as the Burmese cyclone and the Chinese earthquake to contend with, and economic freedom is not always accompanied by personal liberty. But the international finance industry has an opportunity from this potential change in the world order, both in terms of new markets for its products and better investment opportunities for its existing customers.
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9 December 2019 deadline
Joe McDonnell joins as head of portfolio solutions (EMEA)
Adviser of the Year - South East
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