Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Be wary of over exposure to China, says Datt Capital
In the wake of Covid lockdowns in Shanghai, investors are being warned to remain alert to shifts in China’s zero covid policy. According to Datt Capital founder and chief investment officer, Emanuel Datt, “China is the engine room of the global economy, and any further extension of lockdowns geographically will weigh heavily on the global economy.”
The concern is that ongoing extensions and lockdowns in major Chinese cities, will stoke further inflation and with a large portion of the industrial supply chain originating from China. The country is struggling to contain the virus, while the rest of the world moves past it. Food shortages with people being hauled into quarantine against their will and a policy of euthanising pet dogs suspected of havingCOVID, are just some of the growing frustrations the Government is up against.
China’s biggest city, Shanghai, home to the world’s largest container port, has remained shut since March 28. Economists are now witnessing what can be called de-globalisation.
Datt says “Whilst we have observed a definite shift towards re-onshoring and localisation, this process of ‘de-globalising’ a supply chain takes years. We have observed a shift towards alternative suppliers such as India and south-east Asian nations as firms look for more diversity in their supply chain. However, we believe the shift towards localisation will persist due to the rise in shipping costs and decrease in certainty for shipping times.”
One in five container ships is stuck at ports worldwide and most of the backlog is from China. The full impact of China’s policies will only begin to show over the coming weeks. Datt notes, “ultimately investors should consider their portfolios being too heavily skewed towards China and should consider action to diversify to mitigate the effects of an extended lockdown in China.”
These supply issues that are currently being seen are just the tip of an ice berg. Datt says, “Covid lockdowns impacting myriad businesses through supply chains that originate in China.” If Shanghai’s lockdowns are lifted, US ports will be clogged with a flurry of pent-up cargo from new Chinese factpories.
The end result?
Backlogs at ports equate to rising costs for companies and increasing inflation on a global level.
