October 2020

The Measure of Intelligence is the Ability to Change


No, I am not referring to next week’s US election, the big event for this week is the brand launch of Beckon Capital.

I have never been through the exciting process that is a brand launch before as despite my best efforts they just did not want to change the name of any of the institutions I have worked for. Goldman Sachs wanted to remain Goldman Sachs.

I wonder how the pandemic will alter the brand awareness of countries, firms, and people. Governments rise and fall on their brands and political parties constantly try to adjust their brand to attract the most votes. Trump is sticking with his brand whereas the Democrats are playing a more centrist approach.  It looks like the latter is going to hold sway.

Whilst the focus for now is on surviving the pandemic physically and economically eventually Government policy will need to focus on change. Government will have to rebrand. Fiscal stimulus will soon be near the end of its effectiveness, monetary policy is already there which begs the question what will drive growth for the next 5 years?

A portion of GDP growth post 1800 has been derived from population and productivity growth but the composition of the world’s population is also changing, the fertility rate is in decline and life expectancy is increasing. The world is getting older.

Global population growth is slowing from a peak of 2.1% in 1962 to approximately 1% today, the UN predicts further slowing for the rest of this century towards .5% in 2050 and .1% by 2100.

We are already seeing population and in particular working age population declines across the world’s largest economies. China’s working age population peaked in 2012 and is predicted to fall 25% by 2050 according to the World Bank.

So where is growth going to come from? And how will countries differentiate themselves? Maybe from…

Change and agents of change that increase productivity.

Technology adaption that benefits all.

Competitive immigration policies.

A focus on communities, change and growth starts at the bottom.

None of this is new and doesn’t matter when you are trying to survive a pandemic recession but should matter when considering the sustainability of your investments and does matter to those with a longer-term focus, especially Government.

Therefore, the next round of elections is even more important, not just in the US but across the globe.  Which Governments will embrace reform that through productivity increases leads to GDP growth that benefits individuals?

Is change and technology adaption solely for the benefit of the company and not the individual?

How do countries adopt a competitive immigration process amid recent increases in unemployment?

Can countries rebrand? Yes, as firms can and we will. Just wait to see!

Shorter term the virus surges have finally worked their way into equity markets.

As lockdowns are reinstituted around the world perhaps Australia is the best example of the impact of a second waves given what happened in Victoria.

It’s easy to say Australia is doing OK as the second wave was isolated but the full impact on the Victorian state economy is not yet clear. We will see a surge of growth as lockdown measures are unwound, but the real impact will take time to materialise. If the State of Victoria had its own equity market, I suggest it would have been under severe pressure in the last 3 months.

It would look something like this.

Spanish stocks vs the Dow Jones year-to-date.

Or maybe something like this.

Euro Stoxx 50 vs the Dow Jones year-to-date.

For now, the wealth of nations is being replaced by the health of nations.

“The measure of intelligence is the ability to change”.― Albert Einstein

David “Bushy' Nolan

Charts from Refinitiv


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