There\u2019s a lot of talk these days about Donald Trump\u2019s pro-growth agenda, which most likely
\nconsists of stimulating domestic growth at the expense of overseas growth (benefitting small cap
\nequities more than large caps because of their higher domestic exposure). This is protectionism as
\nwe know it. But is \u201cAmerica First\u201d a unique story? Far from it, protectionist measures have been on
\nthe rise for some years globally even as global trade has cooled.<\/p>\n
One of the primary reasons for the backlash against globalisation is globalisation itself.<\/strong> As a consequence, the world is currently witnessing the revival of more controlled capitalism. Amid all of these changes, it\u2019s important to understand that the underlying reasons are structural. So, what\u2019s the way forward?<\/strong><\/p>\n As protectionism turns the tide against globalisation, it also favours domestic sales over foreign The headwinds to globalisation are more structural than cyclical, which means those in favour of open markets have a serious challenge to overcome.<\/p>\n","protected":false},"author":1,"featured_media":60448,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1663,1655,2073,1651,1437,2087,1741],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/60450"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=60450"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/60450\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/60448"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=60450"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=60450"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=60450"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nRecent decades have brought down many barriers and borders, which has created a lot of winners
\nin terms of trade and finance. But the shift has also left large parts of the western middle class
\nbehind. Cheap jobs in emerging markets have crowded out more expensive jobs in the developed
\nworld. The resulting public anger has paved the way for populism, resulting in a global wave of
\nprotectionism.<\/p>\n
\nDemocracy, national sovereignty and global economic integration have proven to be an impossible
\ntrinity in several key countries and politicians seem willing to sacrifice the latter. This is not simply
\na case of establishing protectionist measures\u2014it is becoming immanently clear just how difficult it
\nis for policy makers to agree on large-scale trade agreements nowadays. The US pulling out of TPP
\nis a case in point. Brexit is another example of more inward-looking politics.<\/p>\n
\nAnd as neither the low growth environment nor current political trends are set to change on a
\nglobal level, de-globalisation is a trend, not an intermezzo and is clearly leaving its footprint on
\nglobal trade. A closer look reveals that stagnating trade cannot simply be explained by lower
\noverall growth. The trade intensity, i.e. the amount of trade created by one unit of growth, has
\nfallen significantly. This is important, as it shows that even higher growth does not offer a solution
\nin itself. The headwinds to globalisation are more structural than cyclical, which means those in
\nfavour of open markets have a serious challenge to overcome.<\/p>\n
\nsales. Domestic exposure therefore should have higher relative weight in equity portfolios than
\nit used to have.<\/strong> In fact, America\u2019s new pro-growth agenda has thus far been well received by equity
\nmarkets. As such, the small cap segment appears an attractive choice, having a much greater
\nconcentration of domestic sales than its large cap equivalent. De-globalisation is expected to
\ncontinue to benefit small cap equities relative to large cap companies.<\/strong> In addition, smaller
\ncompanies offer an attractive liquidity premium<\/strong> which can be harvested by investors willing to
\ntolerate higher volatility than in the large cap segment in general. That said, a protectionist trend \u2013
\nif extrapolated – is a risky path to follow over the very longer term. Being a \u201cnegative sum game\u201d
\nin terms of global growth, protectionism also poses risks for risk assets further down the road.<\/p>\n","protected":false},"excerpt":{"rendered":"