It probably won't take much persuasion to convince investors that there is an "Age of Disorder".
This is the title of a new research note from Deutsche Bank stating that the world is entering its sixth modern era.
Say goodbye to the "era of globalization" and prepare for the "age of disorder" in which millennials, firmly established as the generation of "have-nots", take their revenge and redistribute wealth from old to young . Millennials are usually defined as being between the ages of 22 and 38 in 2019, according to Nielsen Media Research.
Strategist Jim Reid's note warns that discussion of inequality within and between countries will not be confined to wealth and income.
"Indeed, the intergenerational gap is a problem that is quickly becoming a political force," the report said. "Assuming that life for millennials does not get more economical as they age (many find house prices increasingly inaccessible), this could be a potential turning point for society and begin to change election results and, with it, politics."
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Votes for Brexit in the UK and President Donald Trump in the US in 2016 have angered and alienated many younger people over political decisions that a sizable majority opposed, the report said.
This could mean the revenge of the millennials as they take more control and distort politics to distribute the wealth from older generations to the young.
“Such a shift in the balance of power could include a stricter inheritance tax system, less income protection for retirees, more property taxes, and higher income and corporate taxes. . . and more all-round redistribution policy, ”says the Deutsche Bank report.
The "new" generation may also be more tolerant of inflation in that it eases the debt burden they have inherited and inflicts the pain on bondholders, who tend to be retired and richer.
“The older generation may also have to settle for less (or even negative) growth in asset prices if the younger generation does not experience a sudden increase in income. This will be a great break from the status quo and create far more disorder than the previous era of globalization. "
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The report suggests that 2020 could be the start of a new era as the coronavirus pandemic brings to an end the era of globalization since 1980.
“The era of globalization, which we are likely to be saying goodbye to, has seen the best combined asset price growth in history, with stock and bond yields being very strong across the board. The age of disorder threatens the current high global ratings, especially in real terms, ”the report said.
What will this new age bring?
• Deterioration in US-China relations and reversal of full relations
• A make-or-break decade for Europe where confusion is less likely
after the economic shock of COVID-19.
• Even higher debt.
• inflation or deflation? At the very least, it's unlikely to be as easy to calibrate as we've seen in the past few decades.
• Worsening inequality before a game and reversal take place.
• The generation gap is also widening before millennials and younger voters soon have the numbers to win elections and reverse decades of politics.
• In connection with the above, the climate debate will be built up with more voters
sympathetic and therefore annoying.
We are in the midst of a technology revolution with amazing stock valuations reflecting expectations of a serious disruption to the status quo, the report says, asking whether this is a revolution or a bubble.
Much depends on whether working from home becomes more permanent, and if so, it is likely to make big changes for societies and economies.
are all companies whose valuations have risen recently on the Nasdaq
Read: Opinion: China's economy may be back on track, but problems plague it elsewhere
The most worrying prediction is an economic battle between the US and China.
"The November US election result is unlikely to change direction," the report said. “Over the course of this decade, relations are likely to deteriorate into a bipolar conflict as both the US and China try to prevent the other's encirclement. Companies committed to globalization will get stuck in the middle if relationships are sour as we fear. "
Over the past 500 years, there have been 16 occasions when a rising power has challenged the ruling one, and 12 times it has ended in war. One consolation is the report that states that a military conflict is unlikely.
Observe: Donald Trump proposes to "decouple" the US economy from China