Larry Fink Says Globalization Is Over — Here’s What It Means For Markets

BlackRock founder Larry Fink has stated that the Russia-Ukraine war is ending the era of globalization, but investors should keep in mind that the global economy and financial system cannot turn a dime, analysts say. .

“There is a lot of talk about countries going back to local production and the era of globalization and long offshore supply chains is over,” Chris Rupkey, chief economist at FWDBONDS, said in a note after the data from US time claims for jobless benefits to their lowest level since 1968. “But that economic model has a gigantic hurdle in the US because there is no one working in the factories to produce the goods here on US soil.” .

So what is Fink, one of the founders of the world’s largest investment management firm, Blackrock BLK,
With 10 billion dollars under management, what are you talking about when you talk about the end of globalization?

In its annual investor letter Published Thursday, Fink said he continues to believe in the benefits of globalization: “Access to global capital allows companies to finance growth, countries to increase economic development and more people to experience financial well-being. But the Russian invasion of Ukraine has put an end to the globalization that we have experienced in the last three decades,” he wrote.

I need to know: It’s the beginning of the end of globalization, say BlackRock’s Larry Fink and Oaktree’s Howard Marks.

Sanctions imposed by the US, the EU and their allies have largely pushed Russia out of the global financial system, while numerous Western companies have abandoned or suspended operations in the country as punishment for its invasion of Ukraine. “Economic warfare” shows what can be achieved when businesses, supported by their stakeholders, come together in response to violence and aggression, Fink said.

“Russia’s aggression in Ukraine and its subsequent disengagement from the global economy will prompt companies and governments around the world to reassess their dependencies and re-analyze their manufacturing and assembly footprints, something that Covid had already prompted many to start doing,” Fink said. he said.

yesee: The war between Russia and Ukraine could accelerate the use of digital currencies, says Larry Fink of BlackRock

In fact, talk of such decoupling first gained momentum when former US President Donald’s administration waged a trade war with China, a trend Fink had highlighted in previous letters. If globalization is set to wind down, some analysts say, it makes sense to look at local investments, which for US investors would include companies whose revenues come mostly from domestic sales and whose assets are mostly in the United States.

from Barron: Globalization may be over. Here are 5 actions that can benefit you.

It also makes sense to expect further upward pressure on inflation as shorter supply chains drive up costs.

However, some expectations around deglobalization may not live up to reality.

After all, what if in a couple of years a company’s competitor is doing business with people all over the world again and can beat you on price? “Do you go back to the old model? It’s not an easy competitive standpoint,” Ed Keon, chief investment strategist at QMA, said in a phone interview.

Competitive forces are likely to maintain “at least a substantial degree of globalization” despite short-term crosscurrents, he said.

In the short term, the simplest trade this year has been to look at areas that have been underinvested for years, including energy and other materials and infrastructure, he said.

“Until that is reversed or we have embraced non-carbon sources until they displace the need for carbon, it seems quite likely that this commodity rally will have some legs,” said Keon, who speaks in favor of investing in commodities. and producers of raw materials.

It’s been a wild ride for commodity markets since the Russian invasion of Ukraine on February 24, with CL.1 oil benchmarks,

rising to around 14-year highs, pulling back sharply and then bouncing back higher this week. Both West Texas Intermediate crude, the US benchmark, and Brent crude, the global benchmark, remain well above $100 a barrel. The energy stock sector, up 42.25% year-to-date, is by far the biggest gainer among the 11 S&P 500 index sectors.

US stocks have generally stumbled at the start of 2022 but have recovered from lows. The S&P 500SPX,
rose 1.8% over the past week, while the Dow Jones Industrial Average DJIA,
achieved a rise of 0.1% and the Nasdaq Composite COMP,
advanced 2%. It was the second consecutive weekly gain for the major indices.

Investors continued to shake off war-related nerves and took cues from Federal Reserve officials, including Chairman Jerome Powell, in stride, who left the door open to raising interest rates by more thann 25 basis points, or a quarter of a percentage point, at future meetings.

Next week is expected to continue to reflect a tight US labor market, with ADP set to release its private sector job creation estimate for March on Wednesday, while the official Labor Department employment report for the month expires on Friday.

The February reading of the Fed’s favorite inflation gauge, the personal consumption expenditures price index, will be released on Thursday. The core PCE price index increased by 5.2% year-on-year in January due to its fastest pace in 39 years.

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