This week marked the 50th year in which global leaders from government, business and investment ascended the slopes in Davos, Switzerland.
What is it?
This is the annual gathering of the World Economic Forum, commonly referred to as Davos after the Swiss town in which it is held each year.
Around 3,000 of the “world’s finest” attend the event each year, with discussions being held around various global issues of the day. This year’s attendee list notably included Greta Thunberg - and quite rightly so, we believe.
So what were people discussing this year?
The World Economic Forum chose to prioritise six areas of discussion this year: Ecology, Economy, Technology, Society, Geopolitics & Industry.
While it would be impossible for us to cover every one of the hundreds of events and thousands of conversations having been held on these issues in this newsletter, we’ve done our best to pick out the big talking points which are likely to set the tone for the global economy this year:
It only took 50 years, but for the first time ever, the environment was the top discussion topic at Davos (hooray!). Greta Thunberg played her part in demanding more action from leaders, while a group of c. 100 climate activists also ascended on Davos to stage a vocal and continuous protest throughout the week. Luckily, they weren’t alone. Larry Fink - CEO of Blackrock, the world’s largest investor - spent much of his time shouting about the fact that “Climate change is becoming an investment risk”. Furthermore, for the first time ever, each one of the Top 5 risks ranked by World Economic Forum members was related to the environment. Go figure.
Global Economy & Fiscal Policy
Attendees were broadly confident that the economy will stabilise this year with an easing in US / China trade tensions (although as we have mentioned before, this might flare up again during the Phase 2 trade negotiations). There was also broad agreement that while central banks have been effective in using monetary policy to support the global economy so far, the onus should now also be on governments to use fiscal policy in the form of tax cuts and increased spending to come to the rescue if needed going forward. IMF Managing Director Kristalina Georgieva stressed this in her opening remarks at Davos, and we’ve also covered Christine Lagarde of the ECB calling for this in recent months. Now it seems other leaders across the globe also agree.
In response to growing populism and public discontent with the shareholder-led model of capitalism which has driven the global economy over the past few decades, many business, investors and government leaders acknowledged a need to forge a new path for capitalism if it is to thrive - stakeholder-led capitalism. Many of the conversations this week centred on how best to transition to a world where employees, customers and other stakeholders in businesses are recognised on par with shareholders when it comes to management decision making. If this progresses beyond being just a theoretical discussion, you can expect global financial markets and arguably the very make-up of global capitalist societies to truly transform over the next decade. The transition to a stakeholder-led model would take years, so it still sounds like something of a pipe dream at the moment, but it’s worth thinking about given the incredibly profound changes it may bring. Watch this space 👀
Goldman Sachs CEO DJ D-Sol has announced the firm will not participate in IPOs of companies which don’t have non-white or non-male representation on their boards. As one of the world’s biggest IPO banks, this message from Goldman Sachs will be important for companies looking to go public in future (see below for a list of expected 2020 IPOs).
Google CEO Sundar Pichai thinks Artificial Intelligence will be more profound for humanity than fire and electricity were. In the discussion, he called for global regulation of AI and for a framework which ensures we get the best out of what it will be able to do while also limiting potential threats.
What Else is Going On?
The world’s large corporates have started reporting earnings for 2019, with US banks having had a pretty bumper year while European banks lagged behind in relative terms, albeit have also performed reasonably well in absolute terms. Furthermore, US Tech companies have also started posting strong results across the board. JP Morgan, Citigroup, Intel, American Express and Atlassian were notable US names among those who either outperformed earnings expectations for 2019 or have provided earnings guidance for 2019 which looks set to outperform versus expectations when the full results are announced. Expect further positive results from the tech giants as well as some earnings misses over coming weeks - we’ll highlight some of them for you as they happen!
Prayers Being Answered? 🙏
The European Green Deal was announced earlier this month - a plan to attract €1 trillion of investment by 2030 in order to achieve carbon neutrality for the EU by 2050 and reduce the EU’s emissions by 50-55% compared to 1990 levels by 2030. This is the central focus of new European Commission president Ursula Von der Leyen’s plans for the region. In typical EU fashion, there was plenty of infighting with some coal & fossil fuel dependent member states refusing to sign up to the deal. Some critics also say it isn’t enough, but at least it’s a start?
Class of 2020 🏨⛳️
Plenty of IPOs Ahead
2020 will bring a new class of IPOs to the market. We’ve picked out some of the likely highlights below for you to dig further into!
US: AirBnB ($31bn valuation in 2017), Reynolds (c. $5.7bn valuation), Topgolf (c. $4bn valuation), Postmates (c. $1bn valuation), Casper (IPO launched, currently ongoing), F45 (IPO filed), Jamf (IPO filed). Potential direct listings: DoorDash, GitLab & Asana. Europe: Wintershell (c. $20bn valuation), Syngenta (potentially 2021, but will be big when it comes; ChemChina purchased the business for $43bn in 2017), Orange Africa (c. $14bn valuation). European payments / fintech: following the IPOs of Nexi & Network International in 2019, the fintech IPO space will likely continue to be active: Interswitch, Paysafe, SIA, Klarna, Avalon, Zopa are all IPO candidates for 2020.
Oh, and the Asian IPO market? It’s hot - very hot. 🔥🔥🔥
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
Disclaimer: At Evarvest we believe in making investing and investment education more accessible, but we don’t provide investment advice and individual investors should make their own decisions. While we try our best, we cannot ensure the accuracy of the information we provide.
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