Globalization means many things - migration, the exchange of ideas and culture, and trade and cross–border capital flows, to name a few. Increased trade tensions, especially between the US and China, have shined the spotlight on this topic and raised important questions: Is the end of globalization at hand and what are the implications for investors?
Here, we narrowly define globalization to mean trade in goods and services and suggest that the dramatic rise in global trade flows (especially manufactured goods) witnessed over the last three decades may have reached its zenith. We argue that this is not a new phenomenon – or related only to recent trade tensions – but rather the continuation of a trend underway since the global financial crisis.
So if globalization has been waning for years, what’s the worry?
Middle East tensions unsettled markets in March, yet European ETFs attracted US$12bn, driven by diversification away from the US and cautious demand for cash and short-duration fixed income.
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