It doesn’t matter where you were on the planet in October – if you had money and were invested you would’ve been on a valuation roller coaster. Extreme volatility in the performance of global markets from Johannesburg to Jakarta might’ve made punters jittery, but it simply reflects the age of volatility in which humanity currently finds itself.
Here are 7 Key characteristics that contribute:
- Cold War re-emerging? Events in Ukraine and the resultant strained relationships between the USA and Russia have rekindled a fear that the heady days of the post-Berlin Wall period are over. However, geo-political uncertainty is not just isolated to old battle scars as the advance of ISIS in Syria and Iraq bears testament. Add to this a simmering emergence of Nationalism in China and you have three combustible physical flashpoints hardly conducive to stability.
- Tepid Economic Recovery in Europe: Yes, the US economy looks much better. Pity then that the same cannot be said for Europe. Germany’s latest Q3 GDP growth of a meagre 0.1% means that the one bright light on the Continent is barely flickering. Add to this the on-going problem of youth unemployment (and underemployment) and the future deleterious effects on spending capacity in historically wealthy markets into the future. As if this was not enough, the rise of populist or extremist political parties on the continent add a further layer of unease. Furthermore, a long-term demographic decline of births on the continent will lower demand and low growth.
- Statistics looking good in the US – but reality says otherwise: Great GDP figures and economic data from the US obscures a struggling middle-class with a spending capacity more constrained than ever before. Stagnant wage growth also affects the growth of the consumer sector as rocky retail results continue to show. The US economy is undergoing a critical shift as workers take home less in terms of real wages but work longer hours. These shifts change habits, hopes and aspirations.
- Technological upheavals continue apace: Rapid innovation and shifts in lifestyle and work conditions are creating a changing environment for humanity. We are currently embedded in a life-long era of technological-driven transition in every aspect of human endeavour. The advent of connectivity, the Internet and smartphones is changing the structures of service providers in every sector. Shale gas or Fracking is destabilising the traditional oil market, which could in turn lead to social upheavals and instability in oil-rich countries that are feeling the brunt of lower revenues. There is a battle to understand and embrace these changes and the varying success attributes to this adds to the volatility on display.
- Chasing global returns is the new game in town: The unique effects of Quantitative Easing and resultant low interest rates in the West has focused business interest on hitherto uncharted markets across the globe. From Wal-Mart’s entry into South Africa to Burger King’s expansion into India, companies are seeking a higher return on investment as home markets stagnate. Different cultural, national and regional trading conditions make this a testing time for business seeking to fulfil the un-ending quest for better growth prospects as demanded by impatient share-holders. Understanding global markets and adapting business to Emerging and new Frontier jurisdictions may well be a central challenge to growth in the near future.
- The rise of the rest: Led by China, the West is no longer the centre of business. The household names of the past may well be just that. Alibaba is now taking on Amazon. Watch out for China’s Xiaomi in the cell phone market or Huawei in ICT. Indian companies like Tata now produce the venerable once-British-cachet brands of Jaguar and Land Rover motor vehicles. South African mobile phone companies operate across the African continent. The world’s brands are no longer Western and increasing competition will continue to exacerbate market volatility as new entrants usurp existing markets.
- The planet is changing: A heady combination of growing populations in emerging economies, rapid urbanization at a pace hitherto unknown to mankind, alarming climate change and the migration of millions of people all creates challenges and opportunities. These are big issues – perhaps the biggest ever to confront the planet. The expansion of urban conurbations like a 40 million Lagos by 2050 (and a 900 million Nigeria) will be a test for planners and people alike. Again, business and governments are battling to cope with all these testing concerns. Those on both the public and private side of the equation who can enhance the lives of their citizens and expand their business footprint will be the winners – but it’s a time of monumental transition testing us all.
These seven points barely scratch the surface. But, if you wondered why October was so volatile, they might just give you a clue. Still, don’t think that it’s going to get any better. This is the world we live in – warts and all – and it’s going to be with us for the rest of our lives. As the great Chinese expression goes, “We are cursed to live in interesting times”.