The main message that came out of the economic forum in Davos this year is wrapped in gloom. “The cheerfulness, optimism and glittering parties were not there,” said Potter Larsen, who covered the conference on behalf of Reuters. The Davos man was wrong again. ”
Larsen is certainly right about the ‘tradition of the man of Davos’. There were, of course, quite a few reasons for the atmosphere of mourning at the prestigious conference, “The list of principals’ main concerns is written today like the Book of Revelation (John’s Vision, the book that closes the New Testament describing the end times, the apocalypse),” writes The Economist. “War in Ukraine, epidemic (especially China’s devastating effort to eradicate the corona outbreak at home), famine (especially in the underdeveloped world), supply chain crisis. In addition, the global impact of sanctions against Russia on food and fuel prices and more.”
There are really many reasons for the sad atmosphere that came out of Davos but the fact that the atmosphere there was very gloomy is not necessarily the reality outside of Davos. Anyone who bothered to follow what was going on at the conference might conclude that Apocalypse is indeed knocking on the door but Davos 2022 actually reflected the mainstream media of 2022 which apparently adopted a gloomy & doom platform so as not to lose ratings.
“When people say that the life we are used to is over, that globalization is over,” says Professor Adam Toz of Columbia University, “they are either naive or apocalyptic. That is the wrong way to look at the situation.”
In recent years we have seen alarming developments regarding the continued economic growth brought about by the technology revolution since the end of the 2008 crisis. But do not stop them. The problems that have arisen will lead to a recalculation of the processes but not to their stopping.
The damage from stopping globalization and the technology revolution will be severe, truly destructive, for all parties but especially for the totalitarian countries and China in particular. Although it seems that Putin and the Politburo in Beijing will continue to challenge the West, they also understand that they will soon have to reach agreements. China understands this a bit more than Russia and the opening of the huge Tesla car factory in Shanghai this week, despite the corona restrictions and the quarrel with the US, points to this.
Wall Street understands the developments well, and there is nothing like examining the behavior of the S&P index to explain investors’ attitude to the situation. Note that in early 2020, in February, the index reached an all-time high of 3,385 at the time. Corona rupture led to a correction of about 32% in less than two months. But by the end of 2021, the index has risen close to 110%, mainly with the help of the technology revolution that has demonstrated miraculous adaptation capabilities to changing facts on the ground.
All this happened despite the corona and despite the fact that throughout 2021 the Russians, openly, prepared an attack on Ukraine. In early 2022, when the invasion began, stock indices traded close to high (the Nasdaq peaked in late 2021).
But as the conflict progressed, problems began to emerge. Inflation and sharp price increases in consumer goods and raw materials, fears of recession, fears of China invading Taiwan, supply chain crisis and the like. These raised concerns about the future and the market fell. But if on Wall Street they thought like in Davos there is no doubt that the stock market would have really crashed, even beyond the 2008 crash and please remember that even now most of the leading stocks in the indices are not “cheap”. the opposite. But Wall Street still believes the crisis will end. Investors, it seems, are clinging to every rumor and appreciation to buy and that is the situation at the moment. So we say: There are many problems but to return to a cold war, with Russia or China, it is not an option and especially not of the two dictatorships and the situation will lead to agreements, which will return the price of oil to its right value, 30-40 dollars and so commodities and infrastructure investments will skyrocket. Wall Street believes that in the meantime it is holding on to consumption, employment and corporate profitability, and in the hope that due to growing fears of an economic slowdown, the central bank will moderate interest rate cuts.
In Davos, despite the cranberries, there was one serious ray of light … The full column will be published tomorrow