Tags: climate | change | long | term | investing

Wise Investors Should Plan for Changing Climate's Economic Sway

america and democracy are underwater from the polar ice cap melt. statue of liberty is under water.
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Monday, 17 December 2018 10:35 AM Current | Bio | Archive

Climate Change and Long-Term Investing

In Poland, nearly 200 countries have agreed how to proceed to tackle climate change, and the Bank of England (BoE) Governor Mark Carney has told the Financial Times in an interview that he was weighing whether the risks, as well as the opportunities from climate change should be a part of its bank stress tests known as the exploratory scenario in 2019.

Climate change is directly and visibly impacting economic activity at the moment. One reason China has to import soybeans from “somewhere” for instance is that China is a water deprived country and soybeans are an extremely water intensive crop.

Environmental constraints on growth like demographic change are something that will increasingly have to be factored into economic market calculations in the future. Maybe, for long-term investors, it could be not such a bad thing keeping that in mind when doing their homework before taking long-term investment decisions.

It’s Federal Reserve Policy-Decision Week

It looks like this week could become an interesting week for long- as well as short-term investors.

There is the Federal Reserve meeting that concludes on Wednesday and of which a rate hike is widely expected. The interest here lies mainly in the press conference where Fed Chairman Jerome Powell, or his scriptwriters, may give some guidance as to monetary policy in 2019.

The combination of quantitative and monetary policy tightening is likely to continue next year. This week’s rate hike will bring the Fed’s current phase of rate hikes to a total of 200 basis points of monetary tightening. The conclusion of the tightening cycle is inevitably closer.

Of course, the uncertainty created by the trade tariffs has to be weighed in any rate decision, raising tariffs being another mechanism by which the economy slows.

So far, the impact of the trade tariffs on the U.S. economy have been relatively limited but the threat is still there.

China’s “3rd Understanding China Conference”

Tomorrow, at the “3rd Understanding China Conference,“ which opened on Sunday, President Xi will deliver a key speech that will among other things also mark the 40th anniversary of the “opening up” of the Chinese economy, according to media reports.

This is an opportunity to describe what the late President H. W. Bush used to refer to as the “Vision Thing.”

There are some in the current U.S. administration anxious about the Chinese vision for the future. It also matters for China.

The economic model that brought China the rapid growth over the last thirty years will not work in the next thirty years.

It is by no means clear that China is on the right path to finding a new model.

All of this is very important stuff, and so, of course, the markets are likely to ignore it and focus instead on any comment, however how minor, that impacts the near term trade outlook.

The desire to sound upbeat on the trade outlook is now being heard in both China and the United States. In China it’s about supporting economic confidence. In the United States it’s about boosting the equity market.

Brexit

In the UK, the interminably tedious process of exiting the European Union (EU) offers no prospect of satisfaction whatsoever.

Prime Minister Theresa May has reiterated her opposition to the idea of a “second” referendum, the BBC reported.

Part of the opposition to this may be that a further referendum is unlikely to resolve anything as the opinion polls in the UK have not really shifted over the past two years and the relative enthusiasm of the two sides continuous to favor the “leave” vote, although that could conceivably change if there were to be a second vote.

Instead, the government strategy appears to be focused on delaying the decisions as long as possible.

The default position remains that the UK must leave with no agreement in place on March 29, 2019.

It is up to the UK Parliament to change that if change is felt to be desirable.

Saudi Arabia Criticizes U.S. Senate Vote

Saudi Arabia has criticized the U.S. Senate which had earlier voted to end U.S. military assistance to the war in Yemen, the BBC said.

However, in Yemen a ceasefire covering the significant port of Hudaydah at the Red See has been agreed on over the weekend and “should” come into effect tomorrow Tuesday, the BBC reported.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Environmental constraints on growth like demographic change are something that will increasingly have to be factored into economic market calculations in the future.
climate, change, long, term, investing
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2018-35-17
Monday, 17 December 2018 10:35 AM
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