After decades of globalization, the world will become more fragmented, which will have profound effects on markets and economies, according to Dr. Dambisa Moyo, a global economist and New York Times bestselling author.
Countries and companies will begin to operate regionally, rather than world-wide, and industries will be restricted to economic “silos,” Moyo said during a presentation at the virtual ACE Academy 2021 conference sponsored by the Investments & Wealth Institute Tuesday. Moyo is an analyst of macro economies and global affairs. who influences policy makers. She currently serves on the boards of Chevron Corporation and the 3M Company. She worked for two years at the World Bank and eight years at Goldman Sachs before becoming an author and international public speaker.
Regionalization rather than more globalization is one of the trends that will be impacting world economies, as well as investors, in the future, she said. “We have spent a lot of time building global networks but those will be disrupted in the future. For instance, supply chains will change. But the question is: Where are the investing opportunities going to come from?”
Despite increased competition that will develop between the United States and China, Moyo predicted China will present investment opportunities, even “as we end up with a more fragmented world.”
“Most pension funds and institutional investors have only 1% to 2% exposure to China right now. I do not understand that,” she said.
Technology will continue to present opportunities.
“We already have seen technology generate enormous returns, but we have not yet seen its full effect on healthcare and education.” Returns will be even greater when those areas are developed, she said.
A third area ripe for investors is the energy transition to a greener economy. “Real transformation is not going to come from the public policy” but from business initiatives. “The transition will come from innovations that are developed to create a greener world,” Moyo explained. “It is a tough problem but it is an area where there is investment opportunity.” She added that energy companies, such as Chevron, where she sits on the board of directors, are doing everything they can to make the transition happen.
However, a different trend—a move toward more private companies and private equity and away from publically owned companies—is going to make it harder to address environmental, social and corporate governance issues because much of the pressure for companies to address ESG issues comes from shareholders, she said.
“We absolutely have to direct high-net-worth investors and clients to private equity. The number of public companies is declining and there will be more focus on private equity in the future,” she said. More pressure also will develop to break up the huge oligopolies that now dominate some industries, such as banking, pharmaceuticals and technology.
Another question to be answered in the future is whether investors putting large amounts of money into businesses in the United States and China “will be a wrecking ball for other countries and emerging economies,” Moyo asked. “Ninety percent of the world’s people live in emerging economies, but they have only 10% of the world’s wealth. That is not sustainable.”