It is no great deal to persuade investors that there is an ‘age of disorder.’
This is the title of a new Deutsche Bank research note. The note says that the world is entering its sixth distinct era of modern times.
So, we have to say goodbye to the ‘era of globalization’. Furthermore, we must brace ourselves for the ‘age of disorder.’ In the ‘new age’ millennials, firmly established as the generation of “have nots,” take their revenge. Thus, they redistribute wealth from the old to the young. Usually, millennials are those between the age of 22 and 38 year olds in 2019. That is, according to Nielsen Media Research.
Jim Reid is a strategist. So, his note warns that the discussion of inequality between and within countries will not be limited to income and wealth.
The report says that an issue that is quickly emerging because of political force is the intergenerational gap. Life does not become more economically favorable for Millennials as they age (many of them find house prices out of reach). Thus, it could be a potential turning point for society, one that would start changing election results and therefore change policy.
The votes for President Donald Trump in the United States and the United Kingdom in 2016 left many younger people feeling alienated and angry by political decisions. Moreover, the report says that a sizable majority of them were against these decisions.
We might see the revenge of millennials. This is because they take more control. Moreover, they skew policies to redistribute wealth away from older generations to the young.
Age of Disorder
The Deutsche Bank report said that such a shift in the balance of power might include a harsher inheritance tax regime, more property taxes, less income protection for pensioners, along with more significant corporate and income taxes, and all-round more redistributive policies.
Moreover, the “new” generation may be more tolerant of inflation insofar. It is because it will erode the debt burden they are inheriting and put the pain on holders of the bond. The bondholders tend to have a bias towards the pensioner generation and the wealthier.
Also, the older generation may have to be content with the growth of the lower (or unfavorable) asset price. This will be the case if the younger generation will not have a sudden income boost. It will be a significant break from the status quo. Thus, it might lead to far more disorder than in the prior era of globalization.
The coronavirus pandemic brought the era of globalization that had been going since 1980 to a close. Thus, the report is suggesting that 2020 might be the beginning of a new era.
The report said that the era of globalization is most probably waving goodbye. It saw the best-combined asset price growth of any era in history, with bond and equity returns extraordinarily strong across the board. Especially in real terms, the Age of Disorder threatens the current high global valuations.
The new age might bring deteriorating China-United States relations and reversal of unfettered globalization. Moreover, it may be a make-or-break decade for Europe.
