Artisan Canvas

Amid a year peppered with trade disputes, Brexit talks and the pandemic’s all-encompassing impacts, long-time Japanese prime minister Shinzo Abe’s decision to step down may have gotten short shrift—a bit surprising, given Japan is the world’s third-largest economy. As Japan also looks to recover from the COVID’s economic disruption (destruction?), the question becomes whether new prime minister Yoshihide Suga and his already eponymously nicknamed economic plan, Suganomics, can finally usher in for Japan a new dawn of economic relevance. Perhaps not surprisingly, there are reasons for hope as well as for concern. 

The recent cancellation of Ant’s IPO and investigation of Alibaba by the Chinese government has sparked a wide-ranging discussion about the outlook for Chinese technology companies heading into 2021.

A common refrain in 2020: Oil prices took a massive hit this year. Indeed, the US crude oil futures markets went haywire in April when WTI prices went negative—an anomaly owing to scarce storage. The spot price for Brent crude, the global benchmark, approached $10/barrel in April. This cratering followed a devastating one-two punch in early 2020. As for many other commodities, demand for hydrocarbons effectively halted amid COVID-19-induced economic shutdowns. But Saudi Arabia and Russia simultaneously ramped up production as they engaged in an ill-fated (ill-timed, certainly) oil price war. As the world slowly climbs out of economic malaise—particularly China, the world’s second-largest oil consumer—and OPEC relations return to something resembling normalcy, it seems logical to expect oil markets to also return to normal. As is often the case, reality is likely to prove slightly more complicated.

If ever a company’s president and most senior executive publicly expresses a hunch about something that company might well do, it’s notable. Even more so when the c-suite officer is Madame Lagarde of the European Central Bank (ECB), who coyly alluded to the adoption of a central bank digital currency (CBDC). Regarding a crypto coin for the euro zone, she said, “My hunch is that it will come.… If it’s cheaper, faster, more secure for the users then we should explore it. If it’s going to contribute to a better monetary sovereignty, a better autonomy for the euro area, I think we should explore it.” But is a CBDC faster, cheaper, more secure? Would it contribute to monetary sovereignty and euro-area autonomy? What are those things, anyway?

To date, deadlines around Brexit haven’t actually proven to be deadlines as such—they’ve been at best guidelines. But with December 31 around the corner, the risk the UK and EU will henceforth operate under the rather tariff-heavy World Trade Organization rules looms. Still at issue are three major sticking points.

There’s been something of a trend in recent years away from trade pacts among large blocs and toward more bilateral agreements. Naturally, there are notable exceptions—the renegotiated NAFTA and the recently agreed Asia Pacific pact jump immediately to mind—but relative to the number of recently agreed bilateral treaties, the momentum seems to have swung in favor of the latter. Perhaps because bilateral agreements are easier to hammer out—a potentially significant factor in an overall tenser geopolitical environment. Whether it’s that simple or something deeper is at work is up for debate—which we’ll leave to the political scientists—but with some big political shifts among major countries in the offing (namely, the US, China, and the UK), it’s worth evaluating the potential direction of future trade deals as we head into 2021.

One of the more surprising (though not entirely unanticipated) announcements from China’s recent Fifth Plenum outlining its five-year plan for the country’s economy was that the country would no longer provide a target GDP growth rate as it has historically done. While some observers may view it as a signal the country is decreasingly able to generate the heady growth rates of years past, it’s worth considering alternate possibilities. Namely, a shift in focus from absolute growth toward quality of growth—a move with significant implications.

Supply/Demand is a semi-regular feature of the Artisan Canvas rounding up interesting and quirky subjects from across the Internet with a focus on economic and business trends. A good rule of thumb among the Artisan Canvas editorial staff is “never reason from a price change.” With that in mind, our latest edition of Supply/Demand.

As consumption habits have dramatically shifted amid the pandemic, demand for some seemingly out-of-the-ordinary goods and services has spiked. Whether these behavioral changes prove lasting, only time will tell.

A cursory glance at major global equity indices shows a pretty clear V-shaped recovery—with a total return of 1.6% in the S&P 500® Index from February 19, 2020 through October 26 and similar pictures in the Russell 2000 and the MSCI ACWI ex US Indices. So are stocks just invincible? Or considering the available economic data, nascent spikes in COVID cases in Europe, and historically poor corporate earnings, is the market too optimistic? Breaking down the broad indices provides some interesting insights for both the bull and the bear cases.

While not as dramatic as during the global financial crisis, dividends in 2020 have taken a hit: Dividends globally declined some $108 billion to $382 billion in Q2—a 22% YoY drop. An estimated 27% of companies globally cut their dividends, including more than half of European companies. In the UK, 176 companies canceled dividends altogether. The story is slightly different in the US: