The world economy faces a seismic shift in global trade dynamics as protectionist policies, including sanctions, export controls, and subsidies, gather momentum, according to the latest Bloomberg Markets Live Pulse survey.
Approximately 80% of the 320 respondents express concerns that these measures could jeopardize economic growth and potentially fracture the global economy into rival trading blocs, risking a 5% reduction in global GDP, as per the World Trade Organization.
Nonetheless, a surprising outcome of the survey is that investors are bullish about capitalizing on this upheaval.
Nearly half of respondents believe that the trend, often referred to as re-globalization or nearshoring, will positively impact their financial portfolios, while only 21% anticipate a negative impact.
This transformation of global trade began with US-China tensions during the Trump era and was accelerated by the pandemic’s early days.
More recently, Russia’s war in Ukraine added urgency to the protection of domestic industries and supply network diversification.
Investors are responding with agility to profit from these new patterns. The Mexican peso is expected to be the biggest winner in currency markets over the next year, outperforming the Chinese yuan and Korean won, as US and Canadian companies seek to shorten their supply lines and reduce reliance on China.
As governments worldwide impose trade management policies at an unprecedented rate, investors are realizing that this volatility presents opportunities.
Strategies are evolving, and long-standing beliefs in free trade are being revised rather than discarded. Companies that understand the challenges and can adapt are emerging as winners.
The path forward remains uncertain, especially in the context of US-China trade dynamics and the impact on global stock markets.
Nonetheless, investors appear confident in their ability to navigate these turbulent waters, betting on their portfolios to thrive in the era of re-globalization.