As I write this, I can hear the roar of the South China Sea as the waves crash onto the beach, tirelessly and unceasingly. 2020 was a year that felt like an unending crash, as a global pandemic threatened the lives of millions around the world, and changed how we live and work.
There is, at least now, a light at the end of the tunnel. An unprecedented race to discover a vaccine for the virus has yielded several winners, and countries are now beginning the work of securing and deploying vaccines to inoculate their populations. The global economy is still holding its breath, but at least we can see a path out of the current maelstrom.
The Financial Times does an annual forecast of global geopolitics, and I thought it might be interesting and useful to have my own take on the questions posed by the FT.
- Will the WHO call an end to the public health emergency over Covid-19? No. It will take some time for countries to deploy the vaccine, and as we have seen with the recent news concerning the B117 variant, the novel coronavirus comes with its own bag of tricks. We will have to live with this for a while, and it will probably be 2022 at the earliest before the WHO calls off its emergency advisory for this pandemic.
- Will the majority of the world’s 5bn adult population be vaccinated? No. While the actual work of developing the vaccine has been a true triumph of scientific prowess and human ingenuity, the logistical challenges involved in deploying the vaccine will mean that many countries will take time to have the vaccine distributed and applied for all that need it. For instance, Malaysia is currently expected to only have its vaccine doses available for deployment in February 2021; I imagine it would be an even more daunting proposition for countries which are less developed and have less funds to undertake a massive nationwide vaccination exercise.
- Will the Conservatives under Boris Johnson re-establish a clear lead over Labour? No. Boris has done well to come this far, after his mendacious role in the Leave campaign and his subsequent ascent into the premiership. As Britons grapple with the reality of trade barriers in a post-Brexit world, they will begin to count the real costs of separation from the EU, and much of the blame will rightfully fall on Boris’ doorstep. On the other hand, Sir Keir Starmer looks like the most competent and convincing leader that Labour has had since Gordon Brown. My money is on Starmer leading Labour back into Government in the next election.
- Will there be an independence referendum in Scotland? No. This, I think, is only a matter of time in coming, but it will probably take some months for everyone in Britain to come to grips with the aftereffects of Brexit. Given the way in which the Tories rammed Brexit through, there will be enough momentum for an eventual second referendum to be called.
- Will the Greens be in Germany’s next governing coalition? Yes. Frankly, I don’t know enough of German politics to make a proper informed call on this particular question, but the FT seems confident that the Greens will be in the picture, and I have no reasonable argument at hand to depart from that judgment (haha, this one is a cop-out, I know!)
- Will Brussels charge a country with rule of law breaches in the use of EU funds? No. While the outrage surrounding Hungary’s Viktor Orban is rising, I doubt that the EU would want to pick a major fight internally while the union is still digesting the departure of the UK from its common market.
- Will Joe Biden be a lame duck president? No. While we will only definitively know this Tue if control of the Senate will fall to the Democrats, I believe that Biden will be able to utilise his deep knowledge of Washington to get deals done, with or without Mitch McConnell standing in the way. Trump gained a lot of political momentum by tapping into the frustrations of rural America, and Joe Biden is probably the Democrat best placed to ride that wave.
- Will the US and China reach a trade deal? No. There is already too much water under the bridge between the two countries, and it is already clear that the there will be a new Red Curtain walling off China and its allies from the rest of the global Internet. Biden won’t have much room to manoeuvre here: he will likely follow Trump’s lead in clearly designating China as America’s primary geopolitical rival.
- Will large-scale demonstrations erupt again in Hong Kong against China’s authority? No. The new internal security law is a game-changer. At this point, China will only further strengthen its hold over Hong Kong politics: dissenters will either face lengthened prison sentences, or leave Hong Kong to build their lives elsewhere. The days of Hong Kong as a global financial and business hub is coming to an end.
- Will India’s economy return to its pre-Covid size? Yes. While concerns remain over Modi’s authoritarian tendencies, the momentum of India’s one billion people will be hard to slow down. And as US-Chinese tensions continue to escalate, American investments into India will rise as the USA continues to enlist and strengthen Asian allies in its encirclement of China.
- Will Nicolas Maduro hold on to power in Venezuela? Yes. Juan Guaido’s moment in the sun has come and gone, and there is little stake for the USA to spend much effort to dislodge Maduro from power.
- Will the US rejoin the 2015 Iran nuclear deal? Yes. Trump’s recent gambits in the Middle East – moving the US embassy to Jerusalem, cozying up to MBS, turning a blind eye to the gruesome murder of Saudi journalist Khashoggi – and Netanyahu’s increasingly brazen appeals to the US Republican Party, will likely engender a rebalancing once the Democrats come to power. The Iran nuclear deal was a crowning achievement for the Obama-Biden administration, and the new president will likely want to rebuild the nuclear accord, partly to defang a long-time rival, but also to rebuild the strategic balance in the Middle East after the upheavals following the American occupation of Iraq.
- Will Ethiopia’s Abiy Ahmed be re-elected? Yes. He was decisive in his intervention in Tigray, and while that has certainly taken a bit of the shine off from his winning the Nobel Prize, it should mean that he would stay in power.
- Will US boardrooms become much less white? No. These things take time, and while the Black Lives Matter has indeed gained serious traction, it will take some time for this to be reflected in the upper echelons on Corporate America.
- Will 2021 be a turning point for electric cars? Yes. Tesla has shown that the time for the electric car is now, and with other automakers following suit, we should see a massive wave of electric car sales as well as electric recharging infrastructure investments across the world.
- Will the combined stock market value of the five biggest US tech companies top USD8tn? No. While the FT seems confident that tech companies are going to only go from strength to strength, I believe that the recent lawsuits against Google and Facebook will launch an avalanche of greater scrutiny against tech companies for their rising monopoly power across multiple industries. Also, the economic recovery following the ongoing vaccinations against Covid-19 will lead to a more broad-based economy resurgence, and channel money away from tech companies that have benefited mightily (and disproportionately) from the abrupt shift towards working from home of the past few months.
- Will more than half of the European office workers be back in the office? Yes. While the adoption of technology solutions will mean that many will continue to opt for remote or hybrid arrangements for working, nothing can beat face-to-face interactions.
- Will the S&P 500 finish above 4,000? Yes. Ultra low interest rates and broad-based global economic recovery will mean that more liquidity will find its way into the equity markets. Time to load up on your stock portfolio!
- Will global carbon emissions return to pre-pandemic levels? No. I think it will take some time for vaccinations to make their way across the global population, which means that the recovery in jet travel, as well as automotive commutes to the office, may take some months before they would come back to pre-pandemic levels.
- Will oil prices stay above USD50 a barrel? Yes. While renewable energy is certainly here to stay, it will take some time for the global economy to fully shift away from fossil fuels. The global economic recovery in 2021 will bring rising demand for oil, as well as other sources of energy.
Tiebreaker: What will Tesla’s market value be at the year end? While Tesla has rightfully done well in making the electric car truly mainstream, even aspirational, I believe that its current market price is already highly speculative. I would bet on the market price to eventually be around 80% – 100% of its current market price of around USD700/share, by the time we get to 1st Jan 2022.
Those are my takes for 2021. A few notable departures from the FT house position… we’ll see how it goes!