Financial advisors have long told clients to respond skeptically to anyone who tells them “It’s different this time,” but conventional wisdom may fail investors in a changing world.
“Let me tell you why this time is different,” said Zambian-born economist and Mildstorm founder Dambisa Moyo on Monday during her luncheon keynote at Financial Advisor’s 2017 Inside Alternatives conference in Denver. “Skeptics will say that we’ve seen this before, but I think that we need to take a step back.”
Moyo, who also sits on the boards of Barrick Gold, Chevron and several other organizations, painted a bleak view of the global economy throughout the rest of the 21st century, dampened by demographic decline and political disruptions.
Slower demographic and economic growth throughout the world, but particularly in the U.S., will begin to limit traditional investment opportunities, said Moyo.
“In the World Economic Outlook that the International Monetary Fund puts forward, they’ve explained that we will never again see the levels of economic growth that we’ve seen for the past 50 years,” she said. “More generally, developed markets are struggling at creating growth without relying on low interest rates.”
Investors will do no better when they look abroad, as demographic growth already slowed throughout western Europe, Australia and much of Asia, said Moyo, who was also skeptical that emerging markets could replicate the high levels of growth enjoyed by the first world in the 1990s during the broad demographic decline of the decades to come.
Amid this slower growth, geopolitical uncertainty threatens to disrupt or upend financial markets, said Moyo.
“More generally, there are huge geopolitical shifts occurring,” she said. “There are now 50 million refugees, the highest number since World War 2. This is creating policy challenges for the U.S. and Europe.”
Most notably, the United Kingdom’s “Brexit” from the European Union will occur in 2019, but Moyo said that while there is “certainty around the timing, there is also uncertainty around the policy environment.”
While recent electoral surprises in Austria and the Czech Republic as well as independence movements in Catalonia and parts of Italy pressure the European Union, and nationalism in general continues to threaten the global order, development in Asia, Africa and South America is hampered by policy shifts to adjust to a changing global order. Nevertheless, Moyo noted that 40 percent of the world’s population will live in Africa by the end of the century, and that Western democracies are poorly positioned to take advantage of the natural and human resources offered by much of the developing world.