Over the past three years – well before the Covid-19 crisis – we have been arguing for a macro-financial regime shift, initially driven by the retreat of global trade as the main driver of global growth. The Covid-19 crisis has acted as a trend accelerator due to its de-globalisation footprint and implied supply-chain bottlenecks. Many growth engines have been re-shored, while the unified central bank model has ended.
We no longer envisage a synchronous global economic cycle. Rather, we may observe regional cycles and increasing fragmentation at a country level, suggesting country risk is back with a vengeance. More recently, the Russia-Ukraine war has reinforced the case for country divergences by adding geopolitical risk to the mix, and pushing inflation unevenly higher due to different impacts stemming from higher commodity prices and supply - demand mismatches. Different country exposures to inflation and, consequently, different room for action from central banks add to a fragmented puzzle.
You can now read the full whitepaper at the link below