Markets

If you’ve seen the movie The Big Short you will remember Christian Bale’s quirky character Michael Burry – the manager of the Scion Capital hedge fund who realises the US mortgage-backed security market is a massive bubble. He goes on to make a fortune by betting on its crash.

Capitalism’s days may be numbered – at least judging by recent polls. A majority of millennials reject the economic system, while 55 per cent of women aged 18 to 54 say they prefer socialism. More Democrats now have a positive view of socialism than capitalism.

On August 1, President Trump sent four tweets about China. With tweet three, which talked about additional tariffs on US$300 billion of goods exported from China to the US, Trump rocked markets by publicly escalating trade war rhetoric.

The global Purchasing Managers’ Index (PMI) has been in decline since 2017. Combined with the heightened risk of a prolonged US-China trade war; this has caused global interest rates to decline and for the US Federal Reserve to halt any further tightening of monetary policy.

I recently returned from a research trip to China and was struck by how seriously environmental issues are now being taken by government and town planners. As China continues to develop, environmental issues are increasingly front and centre in what is described in the country as a “war” against pollution.

For fixed-income investors, understanding environmental, social and governance (ESG) factors – as they are financially material to performance – has proven to be critical in assessing an issuer’s fundamental quality.

Last week’s wellbeing budget in New Zealand was based on the Livings Standards Framework (LSF), a set of wellbeing measures that include cultural identity, environment, income and consumption, and social connections. But these provide no overall index of the nation’s performance.

As the federal election approaches, we’re expected to drown in slogans like “lower taxes”, “wage growth”, “franking credit reform” or “negative gearing reforms”. These mostly assume voters are as obsessed as the politicians with economic and financial issues, rather than, say, the kind of Australia they want their grandchildren to live in. There’s no doubt…