Continued Focus on “The Great Global Shift” Helps Investors and Advisors Navigate a Global Economy Where It’s Every Nation for Itself
Merrill Lynch Wealth Management have announced “The Great Global Shift: Seeking Growth in a G-Zero World,” a new white paper and webcast series designed to help investors and advisors navigate an environment in which market volatility is normal and global conditions are changing rapidly.
According to this latest report, with the world’s three largest economies – the United States, China and Europe – unable or unwilling to take on the burdens of true global leadership, the world has become bereft of traditional economic and political power centers. It has become a G-Zero world and looks to remain that way for years to come, creating an ever-increasing need for investors to understand the geopolitical forces that can influence the markets.
“Seeking Growth in a G-Zero World” is the latest extension of “The Great Global Shift” thought leadership platform, which was introduced last fall to provide valuable context for the changes shaping global markets. In this second installment, white paper authors Lisa Shalett, chief investment officer and head of Investment Management and Guidance for Merrill Lynch Wealth Management, and Ian Bremmer, president of Eurasia Group, discuss the shifting dynamics of power on the world stage, and offer insight into new asset allocations to combat amplified risk and volatility, while pursuing growth opportunities.
“Geopolitical instability is the new status quo,” said Shalett. “As political powers shift and the global economy struggles to rebalance itself, investors might consider flexible investment approaches and a more globally diversified approach to their portfolio.”
To accompany the introduction of the white paper, CNBC Senior Analyst and Commentator Ron Insana moderated a webcast and conducted video interviews with investment, geopolitical and global research leaders:
- Seeking Growth in a G-Zero World – A webcast featuring Shalett, Bremmer and Michael Harnett, chief global equity strategist for BofA Merrill Lynch Global Research.
- Understanding “The Triple Threat” – For several years, historically low taxes and interest rates, combined with mild inflation, have provided a tailwind for both cash and fixed income investments. During this interview, Shalett discusses how shifts in the global economy could change this backdrop, making the environment potentially more favorable to other asset classes.
- Understanding “Home Country Bias” – Merrill Lynch Wealth Management Behavioral Economist Michael Liersch shares his views on the tendency cautious investors have to invest in the country in which they reside, causing them to overlook long-term growth opportunities around the world.
The paper and webcast commentary suggest nations that seek more diverse trading and financial partners can more easily adapt to changing geopolitical conditions – with developed nations such as Canada and Australia, emerging markets like Indonesia and Brazil, and even frontier nations such as Nigeria, Kenya and Ghana leading the way in this effort. These materials also suggest that investors work with their advisors and, based on their personal goals, consider these guidelines in the current environment:
- Extend your global horizons even further by increasing direct exposure to international stocks and bonds.
- Focus on companies even more than countries: Gain exposure to national economies that combine growth and resilience as their vital strategy, particularly over the long haul. In the immediate term, investors may also want to consider emphasizing multinational corporations that themselves have business exposure to a range of overseas markets.
- Rebalance more frequently: Rebalancing once a year may no longer be enough.
- Hedge currency risk: Gain an understanding of how international currency fluctuations can affect investment returns.
- Be “triple threat” aware: Keep vigilant about how taxes, inflation and fees affect a portfolio.
“In this G-Zero world, the economy and the way markets interact have become undeniably more complex,” said Bremmer. “The guidelines laid out in the paper aren’t meant to create more investment complexities, but to clarify a simple methodology for investors that will allow them to account for new global conditions and to consider new approaches to help them reach their goals.”