Investor thinking

The Inflation Enigma and the Covid-19 Dawning of the Age of Disorder

Online Media Round Table #6

Please scroll down for the recording of the round table

The Covid-19 pandemic may mark the start of a new global economic, political and cultural supercycle, the sixth in the last 160 years, and one which ushers in a more tumultuous period of history, where the retreat of the globalisation of the past four decades could also unlock more volatile and structurally higher inflation, leading economic commentators from Germany and Italy’s largest banks, the Dutch statistics agency and AXA Investment Managers debated at a recent AXA IM online media roundtable.

“There are these broader, bigger-picture, sweeping cycles which are the major influences on what happens in politics, asset prices and our way of life. We’ve identified five through history and we think that we’re close to a turning point for a new era,” Jim Reid, Global Head of Fundamental Credit Strategy at Deutsche Bank and author of the research paper: ‘The Age of Disorder,’ said.

The high-inflation supercycle of the 1970s fundamentally stemmed from a demographic shortage of labour, allowing greater unionization, with wages comprising a high share of GDP relative to corporate profits, as well as the oil market price shocks of the period, Reid noted. Around 1980, demographics improved but, more importantly, China began to integrate itself into the global economy and many different barriers to trade were broken down across the world. That turning point ignited a great surge in the number of workers available globally that has lasted until the present day.

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